Report and Financial Statements 31 December 2020 2 Big Society Capital Limited Report and Financial Statements 2020 Report and Financial Statements 31 December 2020 Contents

Company Information 4

Strategic Report 5

Corporate Governance Report 27

Remuneration Report 30

Directors’ Report 33

Independent Auditor’s Report to the members of Big Society Capital Limited 35

Statement of Comprehensive Income 40

Statement of Financial Position 41

Statement of Changes in Equity 42

Statement of Cash Flows 43

Notes to the Financial Statements 44

Big Society Capital Limited Report and Financial Statements 2020 3 Company Information

Directors Alan Giddins3,4 Stuart Foster (Big Society Capital Sir Harvey McGrath1,3 (Chair) Chair of Hill & Smith Holdings Director nominated by the Chair of West London Zone and plc. Formerly Managing Partner shareholder banks)2 Funding London, Trustee of New and Global Head of Private Equity Managing Director of Institutional Philanthropy Capital and Director at 3i Group and a member of Banking and Depositary Services at of the Impact Investing Institute. its Executive and Investment RBS International. Former Chair of Prudential plc, Man Committees. Group plc, Heart of the City and the Secretary London Development Agency. Anne Wade Katie Hall-May Chair of NextEnergy Renewables. Christina McComb OBE3 Non-Executive Director of John Auditor (Senior Independent Director) Laing Group plc, Man Group plc and KPMG LLP Chair of OneFamily and Standard Summit Materials. Trustee of the 15 Canada Square Life European Private Equity Trust Heron Foundation and Partner of London plc. Trustee of Nesta. Leaders’ Quest. E14 5GL

David Hunter (Chair of Audit Risk Chris Wright1,4 Banker and Compliance Committee)2 Chief Executive of Catch22. Chair of HSBC plc Chair of UCLB Ltd (which Catalyst Choices CIC. Director of We 69 Pall Mall manages technology transfer are JUNO CIC, Trustee of Community London and investments/licences for Links, The Lighthouse CIO, Unlocked SW1Y 5EY University College London). Chair Graduate, Only Connect, Launch22 Registered office of the Investment Committee and Catch22 Multi-Academy Trust. New Fetter Place of the Care and Wellbeing Fund 2 8-10 New Fetter Lane (backed by Macmillan Cancer Care Fiona Ellis London and Big Society Capital). Chair of Former Chair of the BBC Appeals EC4A 1AZ the Audit Committee at Gresham Advisory Committee, Trustee of the People’s Operator Foundation, House Renewable Energy VCT1 plc. Registered number Chair of NCVO Funding Commission, Treasurer at Motability. 07599565 Trust Manager of the Millfield Kieron Boyle House Foundation and Vice Chair (Chair of Nominations and of the Nationwide Foundation and 1 Remuneration Committee)1 Futurebuilders. Member of the Nominations and Remuneration Committee Chief Executive of Guy’s and St 2 Lesley-Anne Alexander CBE1 Member of the Audit, Risk and Thomas’ Charity, Trustee of Design Compliance Committee Council and Catch22. Chair of the Non-Executive Director for 3 Member of the Investment Committee Investment Committee for Nesta’s Metropolitan Thames Valley 4 Member of the Valuation and Cultural Impact Development Housing Trust and Meridian Water Performance Committee Fund and a member of the Mayor Regeneration Company, Advisor to of London’s Childhood Obesity the Institute for Apprenticeships Taskforce. Advisory Board member and Technical Education and The of the World Policy Institute and the MicroLoan Foundation. Former Global Steering Group for Impact CEO of the RNIB and Director of Investment. Operations for the Peabody Trust.

4 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report

Big Society Capital Limited Report and Financial Statements 2020 5 Strategic Report Introduction

The following report sets out Big Society Capital’s key activities on our website. The interviewees and the supporting data during 2020 together with the financial performance for demonstrated that Big Society Capital has made substantial the year. In a year defined by the global pandemic, the progress towards its ambitious and challenging objectives need for the business to succeed in its aim to improve the as a result of its activities as a social investment wholesaler lives of people in the UK was greater than ever. Covid-19 and as a market builder. A number of useful suggestions brought great challenge, both to individuals and to many of were also made for further consideration, allowing Big the organisations which Big Society Capital seeks to support Society Capital to take stock and consider how it might build and to collaborate with. The company worked closely on successes and address issues. The company committed with government and other partners in the early stages to a schedule of actions to be taken throughout the second of Covid-19, to support organisations in the Social Impact half of 2020 and into 2021 to maintain and enhance its Investment Portfolio. Big Society Capital adapted its existing performance in respect of stakeholder experience. A full investments through capital and interest rate holidays, to outline of this plan can be found on the website. give cashflow relief to organisations affected by the crisis, and shared important information for the sector across Big Society Capital’s long-term objective is to generate the Big Society Capital and Good Finance websites. It also positive financial returns alongside demonstrable social co-ordinated with a range of investors and the Department impact. The company made a profit in 2020, and this for Digital, Culture, Media & Sport (DCMS) to provide new will be used to achieve further social impact, by making funding, which included the accelerated release of £45 million investments to address social issues aimed at improving of previously committed dormant account money to the lives in the UK. The generation of financial returns will also company. This enabled the establishment of the £25 million enable the company’s operational and market building Resilience and Recovery Loan Fund (managed by Social costs to be covered, and move the company towards Investment Business and financed by Big Society Capital) to generating returns for its shareholders. When balanced provide emergency loans to social enterprises and charities against losses in previous years the positive returns in 2020 disrupted by Covid-19, changes to the £30 million Community put us on a track towards operating on a sustainable basis, Investment Enterprise Facility to allow loans under the although as noted in the financial performance commentary Coronavirus Business Interruption Loan Scheme, and the on page 12, there are potential future downsides to repurposing and rescheduling of planned commitments. portfolio performance as government support measures put in place to support the economy during the Covid-19 The company took a significant step in 2020, with the launch pandemic are unwound. of the Schroder BSC Social Impact Trust plc (SBSI), where the company is the delegated portfolio manager, the first This report looks back at the year 2020, a year in which time it has undertaken such a role. SBSI has invested in many of the company’s objectives set out in its Business high-impact housing, debt funds for social enterprises, and Plan were disrupted or delayed, and crucial new initiatives social outcomes contracts, creating the potential to bring undertaken in response to the Covid-19 pandemic to ensure considerable further investment into the social impact new investment was directed where the need was most market, which has grown six-fold since the company was significant. The speed and scale of Big Society Capital’s established in 2012. response is largely due to the commitment, adaptability and dedication of our Executive Committee members as well as 2020 also saw the publication of the Independent the entire staff team, to whom grateful thanks are due. In Quadrennial Review into Big Society Capital carried out on May 2020 Cliff Prior stepped down after four years as Chief behalf of the Oversight Trust - Assets for the Common Good Executive. At that time Stephen Muers was appointed Interim (the Oversight Trust), which provided a valuable external Chief Executive pending the appointment of a permanent perspective. Both the report and the responses from the Chief Executive. The business is currently developing a fresh Oversight Trust and Big Society Capital are available in full strategy and updated organisational goals through to 2025.

6 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report Strategy and purpose

Big Society Capital’s overriding Working with expert partners, it seeks to understand people’s needs first. Then, using its knowledge and capital, purpose is to improve the lives it collaborates and invests with fund managers and social banks who also want to create a better, sustainable of people in the UK, through future. They, and the social enterprises and charities they investment with a sustainable invest in, create the impact. Big Society Capital’s role is to bring the most relevant experts from its network to the return. The company exists table, generating ideas and connecting capital to where to make a difference: to it’s most needed. help create a fair society by Big Society Capital is currently focusing its efforts on three areas where it believes social impact investment improving the lives of people can be particularly effective: homes for people in need, in the UK through investment. supporting places and early action to address the root causes of social challenges. In addition, it will continue to make capital available to opportunities outside these focus areas, including follow-ons from existing funds where it is seeing an impact or well-formed and highly impactful incoming propositions.

Big Society Capital’s five corporate objectives cascade from this strategy and purpose. They guide team objectives and ultimately feed into objectives for individual staff members.

Corporate 1. To support and invest in 3. To support and invest in innovative models that use innovative models that use objectives social impact investment to social impact investment to enable those in most need to help improve people’s lives, live in affordable, safe and by tackling problems at an secure homes – while creating earlier stage. wider change in the market. 4. To build and sustain a 2. To support and invest in successful social impact innovative models that use investment market. social impact investment to strengthen communities in 5. To grow Big Society Capital’s disadvantaged areas, to build impact, effectiveness, local solutions that improve sustainability and reputation. people’s lives.

Big Society Capital Limited Report and Financial Statements 2020 7 Strategic Report How we achieve our impact (our business model)

Big Society Capital and other Big Society Capital’s investors alongside it have together operating model is based made over £2.2 billion of new on the following criteria:

capital available to organisations Independence: The Oversight Trust, formerly known as The with a social mission. As a Big Society Trust, is an independent holding company that currently owns 68.1% of Big Society Capital’s shares, and was wholesale social impact investor, set up to ensure that the company is held ‘on mission’. Big Society Capital is not owned or controlled by government, Big Society Capital invests in nor is it controlled by the banks that have invested in it. funds alongside others, rather than Transparency: Big Society Capital is committed to investing directly. producing details of the financial and social impact of its investments. It acts as a champion for sharing information and expertise across the social impact investment sector. The company aims to identify the sustainable business models that will create impact and improve people’s Self-sufficiency: Over time, the company needs to cover lives, as well as achieving positive investment returns. its operating costs and any losses from the return on its The organisation focuses on those models that can investments, as well as earn a financial return. This will attract other investors, as ultimately these will provide the demonstrate that the social impact investment model is opportunity to scale and have greater impact. By investing sustainable. its capital, the company aims to build a thriving ecosystem, which has strong impact-driven fund managers and more Wholesaler: Big Society Capital acts as a wholesaler, available finance from diverse sources. The company will deploying capital through fund managers and social banks, judge its ultimate success by the growth and social impact including organisations providing market infrastructure. of the broader environment it helps create, not just the direct impact of its investment capital. Big Society Capital has received equity capital from the Oversight Trust. The source of the capital from the Oversight Big Society Capital also acts as a market builder to Trust is dormant bank accounts managed by the Reclaim increase awareness of, and confidence in, social Fund Limited (RFL). The RFL passes surplus funds to the impact investment. It does this by encouraging other National Lottery Community Fund (NLCF), which then grants organisations to engage with the market, developing the English portion of the funds to the Oversight Trust for research that builds understanding, improving the investment in enterprises domiciled in England. At its launch measurement of social impact, and advocating for an the equity capital base of Big Society Capital was set at appropriate policy environment. £600m of which the Oversight Trust’s portion was £400m. In 2018 additional capital of up to £25 million from dormant bank accounts was announced. During 2020, Big Society Capital received £45 million, the final portion of this equity capital that had not previously been drawn. Big Society Capital has also received £200 million from the shareholder banks (Barclays, HSBC, Lloyds Banking Group and NatWest Group) for investment across the UK, which represents their maximum commitment.

8 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report Business performance and key performance indicators

Our understanding of impact 1. Social impact Big Society Capital’s mandate is to develop the market and make impactful investments. It considers impact across these three dimensions: Big Society Capital is committed a) Impact on people to improving how it understands, This relates to the impact on the people who use the manages and communicates the services and products created by social enterprises and charities, which have received investment from the fund social impact it seeks to achieve. managers or social banks that Big Society Capital invests in. The company uses the Impact Management Project impact dimensions to help define the change it wants to The company has embedded impact in its investment see in people’s lives, using the following key questions: decision-making and portfolio management. In this way, it ensures impact considerations run through everything • What outcomes occur, who experiences them, and it does. The approach to impact measurement and how much? management continues to evolve. • What is the enterprise’s contribution beyond what would have happened anyway? In 2020, Big Society Capital joined the IFC Operating • What are the risks that impact doesn’t occur as Principles for Impact Management, a set of common expected? standards for disciplined impact management. b) Impact on the system Big Society Capital published its latest Impact Report in This refers to the impact our investments and other December 2020. Further information on the market building activities have on the broader investment organisation’s approach to impact can be found on the ecosystem, including investors, policy makers, fund website at managers and intermediaries, to ultimately provide more www.bigsocietycapital.com/how-we-work/impact/. capital and support to enterprises and charities that improve people’s lives in the UK.

c) Financial sustainability All Big Society Capital’s investments are made with the aim of developing financially sustainable structures and enterprises. This ensures the social impact continues to be generated, even after our investment has been repaid with a return. We aim for a positive financial return, as that has the greatest chance of attracting other investors, and ultimately achieving the greatest social impact.

Key impact considerations and approaches for each of Big Society Capital’s investment focus areas are set out below.

Big Society Capital Limited Report and Financial Statements 2020 9 Strategic Report

Investment Focus: Early Action Investment Focus: Homes Many social challenges, from obesity to unemployment The housing market crisis is affecting people all over the and preventing mental ill health, are best tackled by acting UK. High-quality, affordable housing is in short supply, early to address the root causes. But too frequently, the while there are rising levels of homelessness, people systems and interventions that are in place are not set living in unsuitable accommodation, and people unable up that way, and instead try to pick up the pieces later. By to access the support they need. Home ownership is then it is often too late, with issues becoming deeper and increasingly unaffordable, leaving many people in the more complex. private rented market with insecure tenancies.

Big Society Capital works with partners on issues where Big Society Capital looks for housing ideas that both early action can make a difference. With them, it seeks improve lives and help address the root causes of housing to understand people’s needs first, in order to bring the inequality, by changing the system. This includes unlocking requisite range of skills, experience and resources to greater amounts of impact-led capital from institutional the table. Only then can it create ideas and investment investors, and helping scale or replicate business models solutions to address root causes and prevent issues from creating better outcomes. The company invests in occurring or escalating. funds buying or developing homes for vulnerable and disadvantaged people, such as housing for people with The company develops new approaches with the potential learning disabilities or who are homeless. It also invests in to replicate and scale, and does this mainly through social property funds, to increase the supply and quality of outcomes contracts and social ventures. affordable and social housing in the private rented sector.

£106.2 million £146.4 million Total invested by Big Society Capital Total invested by Big Society Capital £287.8 million £815.4 million Total invested by Big Society Capital Total invested by Big Society Capital and other co-investors and other co-investors 27,707 5,418 Number of people supported by Bridges Projected number of people to be housed. Fund Management and Big Issue Invest through Example indicator* outcomes contracts. Example indicator*

Social impact key statistics 1,500+ Number of social enterprises and charities receiving money from Big Society Capital and other investors alongside since 2012

* Exemplar impact figures based on investments made. Beyond these figures, Big Society Capital collects a range of quantitative and qualitative impact information across various outcome areas for all its investments.

10 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report

2. Market building activities Big Society Capital’s overall purpose Investment Focus: Place Where you were born should not affect your opportunity is to help build an investment to live a happy and fulfilling life. But there are many areas in the UK that have experienced high levels of deprivation ecosystem that supports enterprises for many years, and even in relatively prosperous areas, to improve people’s lives. there can be pockets that reveal huge levels of inequality.

Creating long-term social change is complex. We do this both through investing our own capital in ways that bring other investors alongside us and also through Big Society Capital collaborates with local networks and wider market building activities. These involve building leaders from across sectors, to understand local needs, awareness and understanding of social impact investment and identify how it can bring the right range of skills, among investors of all kinds, as well as among social experience and resources to help. Together they generate enterprises and charities that could use repayable finance. ideas for how to connect capital to the enterprises that Our approach to market building is through education and help the communities to flourish. partnership, with a long-term goal of building a movement of people and organisations who use social impact The company designs place-based investments around the investment to improve lives. needs and ambitions of places. It also invests to support community business models that empower local people, Key market building activities during the year to support address local issues and generate long-term income for social enterprises included: the community. • Developing the Good Finance website and information service, to help social enterprises and charities navigate the social impact investment market. This is managed £183.1 million and part-funded by Big Society Capital, with half the Total invested by Big Society Capital funding coming from our sister organisation, Access – The Foundation for Social Investment. The service provides information and resources, alongside a £318.1 million comprehensive directory of social investors and their Total invested by Big Society Capital funds. By the end of 2020, the website had reached and other co-investors almost 200,000 unique users.

• Launching Investment Unpicked, an online training £38 million programme on social investment. The programme is Amount generated in community benefit funds for designed for people who want to equip themselves with local projects. the knowledge and resources to inform and explain

75% Percentage of organisations operating nationally or outside London

Further information on Big Society Capital’s approach to Impact can be found here: www.bigsocietycapital.com/how-we-work/impact/

Big Society Capital Limited Report and Financial Statements 2020 11 Strategic Report

social impact investment to others. It is particularly • Big Society Capital has already helped develop a number aimed at enabling charity and enterprise membership of networks to support investors on the journey towards and infrastructure organisations to spread the word to investing capital into social impact, as well as financial their members, maximising our reach. returns. These include the now-established Social Impact Investors Group for trusts and foundations, and • Launching the Addressing Imbalance project, to improve more recently the Responsible Investment Network – access to social investment among diverse communities. Universities, which has been successfully growing this The project partners with organisations, with the aim year. We are now exploring the creation of a similar of making social impact investment more accessible to network, to support individual investors with significant enterprises and founders from diverse backgrounds and wealth to deploy into social impact. These networks serving more marginalised communities. help deepen understanding of different investor needs, and facilitate greater collaboration between asset • Creating a resource and information hub for owners with shared financial and impact goals. Other enterprises affected by Covid-19, with a comprehensive networks the company is involved in include Pensions range of options to help organisations adapt their work, for Purpose, the British Private Equity & Venture Capital which has over 90,000 unique users. Association, and the Global Impact Investing Network.

• Campaigning to maintain tax relief for social investment. • Through the year, continuing engagement with investor SITR is a valuable tool, enabling enterprises to access groups through the curation of content and speaking social investment, which had been under threat due to opportunities in the media and events, has helped raise a sunset clause in the legislation. Big Society Capital’s awareness of social impact investing among key target SaveSITR campaign was designed to preserve it, by investor groups. sharing inspiring stories of organisations that have so far raised £15 million in investment using the relief, and in this year’s Budget the government agreed to extend the tax relief for at least an initial period of two years. 3. Financial performance • Engagement throughout the year, through speaking The financial statements on pages and holding events and meetings, helped reach hundreds of enterprises and support them on their 39 to 65 outline the company’s journey to consider social investment. financial performance for the period. Key market building activities during the year to support investors included developing products and building networks: The company’s investment portfolio is made up of a Social Impact Investment Portfolio and a Treasury Portfolio. The • The most significant activity was the launch of an Social Impact Investment Portfolio comprises investments investment trust product designed to allow ordinary made to meet the company’s objectives outlined above. investors access to private market impact investments The Treasury Portfolio represents capital held before it is for the first time. The company partnered with drawn down into social impact investment. Schroders, a global asset and wealth manager, to launch the listed Schroder BSC Social Impact Trust plc, As noted in prior years, the company expects to see some after a successful £75 million raise on the London Stock volatility within the performance of the Social Impact Exchange. As the portfolio manager, the company Investment Portfolio, given the long-term nature and risk provides investors with high-impact investments that of the company’s investments, although it also expects contribute to solutions to social challenges, alongside there to be a general trend towards improved financial targeting long-term capital growth and income. As performance. Overall the Social Impact Investment the first tradeable product in high-impact social Portfolio has shown resilience in the face of the Covid-19 investments, this is a significant development for the pandemic and the diverse nature of the portfolio has wider social impact investing market, and opens it up to provided some insulation from this. However it should a much wider range of potential investors. also be noted that government support measures put in place to support the economy during the pandemic have • In addition, Big Society Capital has begun developing a cushioned the impact on the portfolio to date. These may product that would allow institutional investors’ funds result in a delaying of potential future downside, and the to grow the supply of capital into social and affordable company will continue to closely monitor the effects as the housing. The company has been working in partnership economy normalises post-pandemic and the government with fund managers including Resonance, SASC and support measures are unwound. Bridges on fundraising additional capital, alongside the company’s £30 million investment as part of the The company made a net profit in the year of £3.7 million Everyone In project to tackle homelessness. (2019: £2.1 million loss). The net profit is driven by increased social impact investment returns, partially offset by increased administrative costs and lower treasury returns.

12 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report

Social Impact Investment Portfolio • During 2020, the company transferred a portion of its The Social Impact Investment Portfolio generated a return Social Impact Investment Portfolio to SBSI, to create in 2020 of 2.5% (2019: negative 0.02%). Although there the seed portfolio for the new Schroder BSC Social has been a positive return in 2020, upward and downward Impact Trust plc (as described above). This was done revenue volatility from valuation movements is likely at an agreed (independent) valuation, which was in line to continue to be a feature of the company’s portfolio with the prevailing fair value of the assets at the date performance in future years. This return equates to a net of transfer, and consequently the transaction resulted profit in the year of £7.2 million (2019: £0.1 million loss) on in minimal accounting gains/losses. the Social Impact Investment Portfolio. Further breakdown is available in Note 2. A key driver of the company’s year-on-year financial performance, is the extent of realised and unrealised Treasury Portfolio valuation gains and losses in the portfolio. The company’s The largest portion of the Treasury Portfolio is governed Social Impact Investment Portfolio is valued using by a mandate that permits only investments that have accounting standards assessing the fair value of an been successfully screened in accordance with a socially asset at the measurement date, based on International responsible investment process, while aiming for capital Private Equity and Venture Capital Valuation guidelines. preservation. The remainder of the Treasury Portfolio is As is common practice with unquoted investments, a key invested in social bond, equity and multi-asset funds. Total metric of financial success is the actual cash realised on an revenue from the Treasury Portfolio in 2020 was £4.7 investment relative to its cost. million, approximately 20% lower than 2019, which had seen very strong bond and equity market performance. The net profit comprises: The decrease reflects a lower treasury balance and lower, but still positive, mark-to-market increases on the social • Positive net valuation and income movements in the bond, equity and multi-asset funds. Social Impact Investment Portfolio of £9.2 million (2019: adverse £0.9 million). The positive movement Administrative and other expenses in investment valuations reflects the nature and Administrative costs increased by £0.5 million to £7.9 risk profile of the investments and is due to a small million in 2020, and treasury management fees reduced number of write-ups within the portfolio outweighing slightly to £0.4 million. This overall increase of 0.7% write-downs. The positive movements stem largely reflects continued investment to support the delivery from a small number of key investments in the of Big Society Capital’s strategy, and enable investment company’s venture and equity portfolio. Businesses in in the resilience and effectiveness of Big Society Capital, this part of the portfolio have demonstrated the ability as the Social Impact Investment Portfolio continues to to pivot their strategy during the Covid-19 pandemic grow. It includes costs incurred in relation to the launch to continue to grow revenue and profits. Tech-based of SBSI. External legal costs on new investments were also venture businesses have also benefited from the drive higher, due to a number of more complex transactions. online, forced by three lockdowns. This upside has Of the total administrative expenses, it is estimated outstripped weaknesses in parts of the company’s that approximately half relate to the company’s social debt portfolio, where organisations with less robust impact investment market building activities, including business models, and those reliant on footfall, have executing the engagement plan and pipeline development been dependent on government support packages and origination, for which the company receives no provided to mitigate the impact of the pandemic on reimbursement. the economy. The reduction in base rates during the year also impacted valuations and performance of the The longer-term objective is for the company to generate company’s social bank investments. positive financial returns and social impact on a continuing basis, as the Social Impact Investment Portfolio becomes • Income (comprising interest, fees and dividends) on more mature and exits from earlier investments are the Social Impact Investment Portfolio of £4.5 million realised. The generation of financial returns, over the (2019: £4.8 million), a modest decrease during 2020 long term, will also enable the company’s operational and of £0.3 million, largely as a result of interest holidays market building costs to be more fully covered. granted in response to the Covid-19 pandemic, and reductions in the Bank of England base rates Liquidity impacting variable interest rates within the loan book. As its level of overall commitments has increased to close to its available capital, Big Society Capital has developed • Management fees paid to fund managers of £6.5 a long-term liquidity model to assess future liquidity million (2019: £4.0 million). Management fees as a requirements, taking into account future expected percentage of average total committed social impact realisations and expected drawdown profiles. Big Society investments have increased in 2020, 1.15% compared Capital’s cumulative gross signed to date commitments to 2019 (0.78%). This is due to a combination of are £735 million, however some of these have been fully growth and mix of the portfolio together with some redeemed or cancelled and therefore are no longer one-off reclassifications. outstanding. In order to manage the relationship between treasury balances and undrawn commitments, and to help

Big Society Capital Limited Report and Financial Statements 2020 13 Strategic Report

ensure an appropriate balance between these, the Board has approved a policy whereby treasury balances should 4. Social impact investment be at least 80% of the level of undrawn commitments. activity and key performance During the Covid-19 pandemic, the company has more indicators regularly reviewed and updated its liquidity model, to confirm its ability to meet its financial commitments in a rapidly Big Society Capital has a range of evolving economic environment. This involves the stress testing of assumptions and demonstration of the levers that key performance indicators (KPIs) it has available, to ensure it can continue in operation. that it uses to evaluate both the Ongoing reviews of liquidity allowed the company to social impact investment market and respond to the Covid-19 crisis rapidly, permitting the commitment of cash to the programmes designed the organisation’s performance. The to support those most in need during the pandemic. figures below show the company’s Conscious decisions were made to reduce commitments in some areas, allowing for the redirection of cash to KPIs at 31 December 2020. those programmes, with reference to the associated risks/returns. Capital available to social enterprises and charities • Since launching, Big Society Capital has signed 105 (2019: 93) investments.

• The cumulative amount of investments signed by Big Society Capital and its co-investors is £2,264 million (2019: £1,978 million). When an investment is signed, the funds are then available for fund managers to invest in social enterprises and charities.

• Of this £735 million (2019: £600 million) is Big Society Capital’s own funds and £1,529 million (2019: £1,377 million) is from its co-investors.

Social Impact Investment Portfolio In 2020 Big Society Capital signed new investments totalling £115 million (including four follow-on investments) in the following entities (2019: £74 million):

14 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report

Investment Name Commitment Theme Purpose Resilience and Recovery Loan Fund £25m Portfolio Loan fund established by Big Society Capital to specifically support charities and social enterprises whose businesses have been disrupted by the pandemic, with guarantees from the CBILS scheme. Schroder BSC Social Impact Trust plc £22m Portfolio Listed investment company established in partnership between Big Society Capital and Schroders, to provide investors with the opportunity to invest in a diversified portfolio of private market social impact investments, with a focus on delivering a positive social impact in the UK. Social and Sustainable Housing (SASH) £11m Homes Follow-on investment into a fund providing better solutions to charities supporting vulnerable people through housing. Women in Safe Homes Fund (WISH) £10m Homes Housing fund for vulnerable people, to provide affordable, safe and secure homes across the UK for women and their children experiencing homelessness or who are at risk. Eka Ventures £8m Early Action Impact venture fund investing at Series A stage in sustainable consumer technology companies. Arts and Culture Impact Fund £6m Place Follow-on fund established to fulfil unmet demand and deliver social impact through the arts. National Homelessness Property Fund II £5m Homes Part of the Everyone In initiative, this fund aims to provide ‘ordinary homes on ordinary streets’ to formerly homeless people or those at risk of homelessness. Resonance Supported Homes Fund £5m Homes Property fund providing supported living to adults with learning disabilities, developed in partnership with United Response. SASC Bridge Loan £5m Place Follow-on investment for lending to community groups, enabling them to develop, own and govern a proportion of professionally developed ground-mounted solar farms. SASH Side-car LP £4m Homes Side fund to SASH, aiming to provide additional funding to support vulnerable and homeless individuals in Lincolnshire and Gloucestershire. Ada Ventures £3m Early Action Gender and minority-focused pre-seed venture fund. Bethnal Green Ventures Approach Fund £3m Early Action Tech For Good venture fund investing at accelerator, pre-seed and seed stage as they build a path to scale. Connect Ventures III £3m Early Action Follow-on investment into a fund run by an established seed-stage venture manager, with focus on backing purpose-led founders of tech-enabled ventures that build a better society. Bridges Evergreen BSC Housing Fund £2.5m Homes Part of the Everyone In initiative, a fund generating improved social outcomes for homeless people and those vulnerable to homelessness. Good Food Fund £1.1m Early Action Pilot fund in partnership with Guy’s and St. Thomas’ Charity, supporting healthy challenger food brands to scale in order to improve access for lower-income communities who disproportionately experience childhood obesity. Resonance Health and Wellbeing (Access) £1m Portfolio Follow-on investment to support VCSEs and SMEs in the health and social care sector.

Big Society Capital Limited Report and Financial Statements 2020 15 Strategic Report

Social Impact Investment Portfolio (continued) • At 31 December 2020 Big Society Capital’s Social Impact Investment Portfolio comprised investments totalling £312 million, in the following activities (% of portfolio by valuation):

Valuation by £22.4m £44.4m product type: 7% 14% £40.5m £2.7m 13% 1%

£11.9m 4% £61.1m £312m 20% £29.3m 9%

Renewables Intermediaries Property Ventures & Equity SOCs Debt Funds £46.8m Bank lending £41.2m Charity bonds 15% 13% Small loans £11.4m Public listed 4%

The major Pensions and insurance categories Funds and funds of funds of co-investors Charities and foundations include: Individuals and Family Offices

■ 2020 Social Bank Depositors ■ 2019 Government bodies

Other

Banks

Housing associations

0% 5% 10% 15% 20% 25% 30% 35%

16 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report

Money reaching social enterprises and charities: Subsequent events • The cumulative amount drawn down from Big Society During March 2021 the company received a £15 million Capital and its co-investors is £1,456 million (2019: grant. This grant will be directed towards specific housing- £1,201 million). Big Society Capital’s expectation related investment programmes designed to support is that the average investment will typically take those most in need post-pandemic. Further details of the between one and six years to fully draw down. grant will be released in due course. • Of this £452 million (2019: £348 million) has come from Big Society Capital’s own funds and £1,004 million (2019: £853 million) from its co-investors. In 2020, drawdowns by investee entities totalled £101 million (2019: £74 million). • Drawdowns to date have been utilised as follows (based on Big Society Capital’s drawdown):

Cumulative Capital for social enterprises and charities drawdown by through funds and social banks Property, mainly to help charitable product type: service delivery

■ 2020 Cash balances in funds ■ 2019 Management fees paid to fund managers

Helping charities deliver services using social impact bonds

Capital for arrangers (investments into social impact investment advisers)

0% 10% 20% 30% 40% 50% 60% 70%

Cumulative Asset-locked social enterprises and charities drawdown by organisational Non-asset-locked social enterprises form: Cash balances in funds

Capital for arrangers (investments into social impact investment advisers)

Social impact bonds

Management fees paid to fund managers

Other (eg. local authorities as part of mixed funds)

0% 10% 20% 30% 40% 50% 60% 70%

Big Society Capital Limited Report and Financial Statements 2020 17 Strategic Report Big Society Capital as a responsible business

Big Society Capital seeks to Big Society Capital integrates ESG in its investment process, from due diligence to portfolio management and maximise its positive impact, and intermediary support. It identifies and seeks to mitigate and manage the material ESG risks in its portfolio. It demonstrate its values as a social also requires its investees to follow core responsible organisation, through how it runs investing practices, including following Big Society Capital’s Responsible Business Principles and exclusion list. As its operations, its staff policies, its an active investor, Big Society Capital has high levels approach as an investor and its wider of engagement with its investees, which provide the opportunity to support the continuous improvement of engagement with the social sector. responsible and impactful practices.

Big Society Capital also ensures that its Treasury Portfolio Responsibility as an investor is managed in a responsible way, with ESG factors At the core of Big Society Capital’s investment philosophy, considered as a core part of the Responsible Investment is the aim to achieve positive impact on people, create Policy. This is an area that it is increasingly engaging systemic change and deliver a sustainable financial return. its fund managers on, to ensure they are delivering To achieve these three aims, Big Society Capital believes responsible investing practices. that one component of its approach is to invest responsibly by considering environmental, social and governance (ESG) Responsibility as an employer risks and impacts. Big Society Capital seeks to be a responsible employer. Key initiatives include the provision of ongoing mental In 2020, Big Society Capital enhanced its responsible health and wellbeing support to all its employees, utilising investment practices. Its Responsible Investment Policy an employee assistance programme that offers free and brings together its approach to assess and manage ESG confidential counselling services. It also employs an early risks across its Social Impact Investment Portfolio, along intervention service, which provides coaching and advice with a set of Responsible Business Principles and an in respect of stress or anxiety. In 2020 the company signed exclusion list of certain sectors. Further work is under way up to TogetherAll, an additional online platform to help in 2021 to operationalise this policy. empower employees to manage their physical and mental wellbeing. In addition, in 2020 Big Society Capital became a signatory to the IFC Operating Principles for Impact Management. Big Society Capital has provided comprehensive training Part of demonstrating best practice in impact management to a number of its employees, to allow them to become includes considering negative impacts and ESG risks that mental health first aiders. A series of regular masterclasses Big Society Capital is committed to meeting. was also provided throughout 2020 in respect of resilience and managing change, particularly pertinent areas, given Big Society Capital has been actively involved in 2020 with the challenging environment. the development of the Sustainability Reporting Standard for Social Housing, which seeks to create a common best In responding to the particular impact of Covid-19 on practice standard for identifying, managing and reporting employees in 2020, Big Society Capital updated its flexible on key ESG risks in the social housing space. working policy and introduced a set of revised frameworks and principles, to give staff the freedom to work flexibly on a longer-term basis, including post-Covid-19.

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Responsibility as an employer: In response to the challenging environment created by the Equality, Diversity and Inclusion Covid-19 pandemic and associated measures in 2020, Big In 2020, Big Society Capital adopted three principles to Society Capital established a Resource Bank of pro bono guide its equality, diversity and inclusion work. and low bono experts, who could provide additional and specific support to intermediaries on an ad hoc basis. • Intention: making deliberate choices about what we are going to do and how we will know when The company also wrote to each of its social we have made progress. enterprise, charity or voluntary and community sector infrastructure partners, to offer help and support, • Transparency: collecting and publishing data responding in a practical way wherever possible to where possible. meet each organisation’s members’ unique needs. In association with Good Finance, a Covid-19 Resource • Building capacity with and for others rather than trying Hub was also created (https://www.goodfinance.org. to do everything ourselves: we do not yet have all the uk/resources/covid-19-resource-hub-charities-social- answers and are still developing our plans. enterprises), which currently has over 70,000 users.

It is hoped these three principles will help the organisation Responsibility to the environment make progress when applied across four areas of work: Big Society Capital is committed to considering material internal standards; the investment strategy and processes; environmental impact and risks in its investment activity, managing and reporting on the portfolio; and work as a through its targeting of systems change and impact on market builder. people. The newly developed Responsible Investment Policy actively promotes the protection of the environment Furthermore, Big Society Capital has worked with Inclusive and the combatting of climate change as underlying Boards and a working group from its own staff team to responsible principles. develop an Equality, Diversity and Inclusion Action Plan for 2021-25. This builds on the first plan, published in Big Society Capital’s role in developing and adopting the 2019, while also recognising there is still much for the Sustainability Reporting Standard for Social Housing in organisation to do in this area to bring about a more 2020, will encourage more awareness and transparency equitable, diverse and inclusive sector. The report includes among investors and providers of social housing on the a comprehensive action plan for the business to enhance environmental impact of real estate development, which is this area, to which it has fully committed. This will continue a major source of GHG emissions. to be an area of focus in 2021. In 2020, Big Society Capital continued its engagement on The company has also joined a number of other the Just Transition agenda, including as an advisory group social sector businesses in providing apprenticeship member for the Financing a Just Transition Alliance, hosted opportunities, as part of a programme aimed to promote by the LSE Grantham Research Institute. This builds on diversity of thought and background across the sector. its experience investing in community renewables: since 2012, Big Society Capital has supported fund managers Responsibility to the sector to invest £124.8 million across 23 large community Big Society Capital promotes the use of social enterprises renewable projects, primarily solar generation. These both as part of its business supply chain and by individual projects have a forecast community benefit funding of employees. At the end of 2020, Big Society Capital had 35 £38 million over the duration of the investments, and (2019: 25) charities, not-for-profit and social enterprises in have saved 382,000 tons of CO2 since inception. Latest its supply chain, including providers of stationery, staff care available data shows that Big Society Capital supported packages, and team-building events such as online cookery projects account for more than half (56%) of the total lessons. There is also a dedicated internal ‘Buy Social and installed capacity of the sector. Go Green’ Slack channel, so that staff can share their recommendations, and the company actively supports At a company level, Big Society Capital continually seeks Social Enterprise UK’s annual #BuySocial campaign. to reduce its environmental impact as far as possible, for example using recycled paper and segregated recycling The company encourages staff to undertake trustee and systems in its staff kitchen, as well as the ongoing other governance roles in social enterprises and charities, emphasis across the organisation to ‘Buy Social and outside their work commitments and on a voluntary basis. Go Green’. In 2020, the Covid-19 lockdown measures Over a quarter of staff serve as trustees for a variety of significantly reduced the environmental impact in respect charities and social enterprises. During 2020, 50 (2019: 43) of staff travel, something which the new flexible working charitable organisations were supported by the company’s principles seek to preserve, as the country begins to staff in this way. transition out of the current lockdown environment.

Big Society Capital Limited Report and Financial Statements 2020 19 Strategic Report Board decision-making and stakeholder considerations (s.172 report)

Big Society Capital exists to improve Big Society Capital’s goal is not only to ensure its own sustainability and reputation, but to balance this by acting as the lives of people in the UK, through a catalyst to the development and growth of the wider social impact investment market. Our Board of directors is mindful investment with a sustainable of the need, therefore, to take a holistic and long-term return. It is vital to the success of approach to decision-making, and of its duty to promote the success of the company for the benefit of its members, this mission that the company can while having regard to the following (s172(1)) requirements: establish, balance and maintain (a) the likely consequences of any decision connections with a diverse set of in the long term; key stakeholders, with differing (b) the interests of the company’s employees; (c) the need to foster the company’s business interests and expectations. It works relationships with suppliers, customers and others; with expert partners to identify need, (d) the impact of the company’s operations collaborates and invests with fund on the community and the environment; (e) the desirability of the company maintaining a reputation managers and social banks, and for high standards of business conduct; and liaises with the social enterprises (f) the need to act fairly as between members of the company. and charities that are the end beneficiaries of funds. (a) Long-term decisions

As part of the company’s objective (Corporate Objective 4) to build and sustain a successful social investment market, the Board seeks to make decisions that will have long- term impact outside of the company itself, maturing and deepening the wider market. In support of this objective it is also necessary (Corporate Objective 5) to grow and preserve Big Society Capital’s own reputation and effectiveness, and consider its risk profile.

A useful case study in 2020, to exemplify the Board of directors’ understanding of the need to balance long- term impact with shorter-term effects on a diverse number of stakeholders when making decisions, was the establishment of SBSI, in partnership with Schroders. This involved Big Society Capital acting as portfolio manager, seeding SBSI’s investment portfolio with assets from its own proprietary portfolio, and acting as a seed investor in SBSI itself. The directors carefully considered the risks

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and opportunities of this project, including financial, The Board also receives reports in respect of key risks reputational and regulatory aspects, and the impact on the through its Audit, Risk and Compliance Committee (ARCC). company’s employees and risk profile. People risk has been a key topic throughout 2020, in particular as a result of the Covid-19 pandemic. The matter was discussed at length within the Audit, Risk and Compliance Committee from a risk perspective, In autumn 2020, Big Society Capital established a Staff as well as the Board, in respect of strategy. The Board Council, which comprises a representative group of (including via an appointed Sub-Committee), considered employees across the business and meets quarterly. the potential reputational risk, and reviewed in depth the The Council reviews pertinent Board papers ahead of proposed media statements and prospectus content, as submission, and provides input on key issues and projects, well as underlying assumptions in respect of returns, and which is received by the Board through the report from the parameters of the company’s responsibilities. The the CEO in every Board meeting. Board also considered resource risk and workload impacts on employees, changes to the company’s risk profile, and Key issues and actions taken the various expectations and requirements of regulators, The Covid-19 public health crisis had a significant effect investors and other parties to SBSI. in 2020 on workers across the UK, raising challenges associated with education, home working, mental health The Board also considered the ultimate aim of the and safety. The Board was acutely aware of the people product. As a listed company on the London Stock impact created by this environment, and convened Exchange, SBSI is designed to invest in private market additional meetings, particularly during the initial lockdown funds and opportunities that can deliver high impact, period, to give careful consideration to this. The Board benefiting people in the UK. Private market funds in requested reports from Executive Management on Limited Partnership structures are not accessible to retail actions being taken to address Covid-19 related people investors, or even those who are advised by wealth and challenges, in particular with regard to the risk of staff investment managers such as high-net-worth individuals, ‘burnout’ in a working-from-home environment and given charities and endowments. The establishment of SBSI the company’s other strategic priorities for the year. It also therefore represented an important milestone in considered the operational challenges associated with democratising access to investing for high impact in private re-opening the office in a safe manner where appropriate, markets. In launching SBSI, Big Society Capital’s intention and transition planning for the future. was to have a best-in-class impact product with the widest possible investor access, and to make it easier for other As reported within the responsible business section of similar products to follow into the market. this report, the company commissioned an independent report in 2020 in respect of Equality, Diversity and After careful consideration, the long-term value of SBSI as a Inclusion, and this will remain an area on which the Board social investment tool, and the potential for it to contribute is focused. The action plan that arose from this report, will towards the expansion of the wider social investment be used by the N&RC to monitor progress. market, coupled with the company’s ability to manage and mitigate associated risks, led to the Board’s decision to The Board and N&RC also discussed and agreed a series enter into partnership with Schroders to create SBSI. of steps in 2020 in respect of gender equality throughout the organisation, having had extensive discussions, particularly regarding position and pay.

(b) Interest of the There remains work to be done in both of the above company’s employees areas, and the Board anticipates continued reports and updates from Executive Management on progress, with Stakeholders staff surveys reflecting this as an area of importance for Big Society Capital places considerable emphasis on employees. supporting and developing its employees, and is promoting a diverse and inclusive culture. The Board of directors is aware of the crucial part which Big Society Capital’s employees have to play in achieving each of the company’s objectives, and of (c) Relationships with suppliers, the risk to the business posed by the underdevelopment, customers and others dissatisfaction or departure of employees. Stakeholders How the Board engages Stakeholders for Big Society Capital include suppliers, The Board has a committed and active Nominations shareholders, fund managers, social banks and other and Remuneration Committee (N&RC), which spends a intermediaries, frontline organisations receiving sizeable proportion of its time discussing people issues, investment, and, ultimately, the end-users of those social HR strategic plans, remuneration policies and the results enterprises and charities. The company relies on good of staff surveys. The Head of HR is a standing attendee and relationships with its partners to achieve its long-term reports to each meeting. aim to build and sustain the social impact investment market (Corporate Objective 4), and on establishing a

Big Society Capital Limited Report and Financial Statements 2020 21 Strategic Report

strong reputation among all stakeholders, particularly services in a way that aligns with its overall objective, and shareholders and government bodies, to continue to continues to expand the number of social enterprises sustain itself and preserve and strengthen its reputation within its supply chain. Where this is not possible or (Corporate Objective 5). It also relies on experts and appropriate, the company remains committed to seeking advisers to appropriately target its investment areas ethical, environmentally or socially sound services as far (Corporate Objectives 1 to 3), and on the frontline charities as possible. Please see our responsible business section and social enterprises to deliver the intended impact for above for further information. their respective beneficiaries, to allow it to achieve its overall purpose (to improve the lives of people in the UK). Government Bodies: Regulators: The Board is aware of its obligations to the How the Board engages FCA, and key FCA submissions are brought to the Board in Intermediaries and Investors: a timely manner and considered carefully. Fund Managers and Social Banks: The company’s Valuation and Performance Committee, which comprises both Other Policy Making Bodies: Big Society Capital works closely executives and Board members, reviews Big Society with various government and policy making bodies, and, Capital’s Social Impact Investment Portfolio, from both where relevant, material matters in respect of the activities an impact and a performance perspective, and the of these bodies and the company’s interaction with them investment team holds intermediaries to account, working are brought before the Board via the CEO report. with them to find solutions in challenging areas. The Board receives an Activity Report in each meeting and Key issues and actions taken: holds a detailed Portfolio Review annually, which includes As outlined in the Introduction, a key landmark in this consideration of each of the three investment areas area in 2020 was the company’s consideration and (Corporate Objectives 1 to 3). The Board’s Audit, Risk and response to the Quadrennial Review commissioned by Compliance Committee also considers matters arising the Oversight Trust, which provided feedback from the from the Valuation and Performance Committee, and majority of the above stakeholders including suppliers, reports any significant issues to the Board. customers, intermediaries, fund managers and front line social enterprises. The Board discussed the review in SBSI: In 2020 the company entered into a contract to depth and, in addition to publication of its response on provide Portfolio Management services to Schroder Unit the Oversight Trust’s website, committed to a schedule of Trusts Limited, which acts as Alternative Investment Fund actions, which includes creating and implementing better Manager to SBSI. Big Society Capital provides quarterly tools and explanations for end-users in respect of cost reports to the SBSI Board, and has established an SBSI- of capital, discussions with Board and shareholders on specific Investment Committee, whose composition expectations on rates of return and working with Access includes non-voting representatives from Schroders. – The Foundation for Social Investment to consult with Reports on the progress and performance of SBSI are managers and investors on flexible, patient products. provided to the Board and its Audit, Risk and Compliance Committee on at least a quarterly basis.

Frontline Organisations and their Beneficiaries: (d) Impact on community Impact Reporting and Media: Every alternate meeting and environment of the Valuation and Performance Committee focuses on performance, including impact performance, of the Stakeholders underlying investments. In 2020 Big Society Capital The positive effect on community and environment produced its Impact Report, which was brought to the underpins Big Society Capital’s overall purpose, and its Board ahead of publication, and the Board receives an corporate objectives (in particular Corporate Objective additional annual report in respect of impact. A media 2). The company’s portfolio of underlying investments round-up is produced and circulated to the Board number over 1,500 individual charities and social on a monthly basis, providing an overview of media enterprises located across England, Wales and Scotland, representation and feedback from the social sector. The covering both rural and urban areas. Board has an open invitation to the annual ‘Frontline Festival’, which showcases specific beneficiaries of Big How the Board engages Society Capital funds. In addition to reporting as set out above, covering activities and impact across all Big Society Capital’s investments, the Advisory Board: The Advisory Board for Big Society Board is also updated as to any key operational changes, Capital comprises a selection of individuals from social that may impact the business’ environmental footprint. sector organisations and social investment organisations, and meets quarterly with the CEO to gain feedback In 2020, the Audit, Risk and Compliance Committee on pertinent points and projects. Minutes from these reviewed the business’ key risk areas and particularly discussions are delivered to the Chair of the Board. discussed climate-related aspects. As a result, the company is further developing its management and Sourcing of Supplies and Services: Wherever possible assessment of climate-related risk in 2021. Big Society Capital has a policy of sourcing goods and

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As far as possible the company seeks to minimise its environmental footprint, something that has been aided through the enhancement of remote working tools as part of its response to the Covid-19 public health crisis. Please see the responsible business section above for more details.

Key issues and actions taken The Covid-19 public health crisis had wide-ranging consequences for many social enterprises and individuals in 2020, from an economic, health and wellbeing perspective. In response, the Board of directors reviewed and reprioritised the company’s strategy, placing initiatives such as Everyone In (provision of long-term sustainable solutions for rough sleepers) and the Resilience and Recovery Loan Fund (enabling social lenders to provide emergency loans to social enterprises and charities experiencing disruption as a result of Covid-19) at the forefront of its activity, and working with intermediaries and social enterprises to extend or replan payment schedules for loans where necessary.

(e) High standards of business conduct

Big Society Capital is party to a Governance Agreement with its majority shareholders, requiring it to adhere to a comprehensive set of Principles in respect of Investment, Responsible Business, Appointments and Remuneration. The company seeks to uphold best practice standards in all areas, and to respond quickly and positively to stakeholders.

(f) Acting fairly between members

The Oversight Trust The Chair of the Board liaises regularly with the Chair of the Oversight Trust, which is Big Society Capital’s majority shareholder and is charged with an oversight role over the business. Under the terms of its Governance Agreement, Big Society Capital delivers quarterly reports to the Board of the Oversight Trust covering financial performance, activities and strategic plans, and refers to the Oversight Trust on certain decisions, such as changes to remuneration policy and appointments to the Board or CEO positions. The Chair of the Board and CEO of Big Society Capital attend one Board meeting of the Oversight Trust a year, to discuss matters relating to strategy and performance.

Shareholder Banks Big Society Capital also regularly meets with its minority shareholders (the shareholder banks) to provide similar updates. The Board of Big Society Capital includes one Non-Executive Director nominated by the four shareholder banks (Stuart Foster), and all shareholders receive copies of Big Society Capital’s Board papers.

Big Society Capital Limited Report and Financial Statements 2020 23 Strategic Report Principal risks and uncertainties

Risk management framework The framework is based on a ‘three lines of defence’ model. The first line of defence is through the executive leadership team and line managers who are responsible In order to achieve its mission, Big for day-to-day identification, reporting and management of risks. The second line of defence is responsible for Society Capital is required to take designing risk policies and monitoring risk performance, and providing objective challenge to the first line of risks from a strategic, financial return defence – for Big Society Capital this is primarily delivered and social impact perspective. The through ARCC and the executive leadership team. The third line of defence provides independent assurance company has established a risk of the overall systems of internal control and risk framework and a related set of governance, and is achieved through a programme of external assurance in respect of compliance, key controls policies that provide oversight and and processes. accountability for the identification, assessment and management of Risk appetite risks across the organisation. Big Society Capital’s Risk Appetite Statement, reproduced below, outlines the level of risk that the Board is willing The Board, supported by the Audit, Risk and Compliance to accept to deliver its objectives, and provides the Committee (ARCC), is ultimately responsible for Big Society link between the overall business strategy and the risk Capital’s risk management framework, and for regular management framework. review of its adequacy and effectiveness, with operation of the framework delegated to the executive team. The “Fulfilling Big Society Capital’s mission requires us to take framework is designed to support informed decision- risks. In order to achieve the company’s financial return making regarding the risks faced by the company, with the and social impact objectives, Big Society Capital is willing to intention of managing acceptable risks within the agreed take and accept a high level of investment risk. It will also risk appetite, rather than eliminating such risks. sometimes accept more risk for lower financial returns where the social impact or system change returns are The key elements of Big Society Capital’s risk management justified. The company is also exposed to a high level of framework include: strategic-type risk through the selection of its principal • setting of annual and longer-term corporate objectives focus areas, and the extent to which social impact and quarterly reporting against agreed KPIs; objectives for these can be delivered. We manage and mitigate those risks through a broad network of investors • a Risk Appetite Statement approved annually by the Board, and enterprises to build understanding, and through together with key indices that are monitored quarterly; frameworks of rigorous social impact, financial and • a quarterly review by the executive team of key risks systems change assessment; appropriate structuring of faced by Big Society Capital; transactions, portfolio allocation, concentration thresholds; • a robust investment decision-making process; and robust governance mechanisms. • half-yearly portfolio valuation and monitoring processes; and The higher level of risk appetite in respect of our core • policies, procedures and authorisation levels against investment activity, how we achieve social impact and which the company operates. our strategic focus, together with the policy risks to

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which a number of Big Society Capital investments are exposed, is balanced by a more cautious approach to risk Principal Risks in other areas. The Board looks at the appetite for risks across a number of areas, including investment strategy, Big Society Capital’s principal risks are considered under liquidity, financial performance, social impact, operational, the following generic headings: regulatory and other external factors. The company’s risk appetite is set in the light of its principal risks and their • Strategic Risks impact on the ability of Big Society Capital to meet its • Performance/Investment Risks strategic objectives.” • External Risks • Operational/Preventable Risks The Board sets risk appetite for the most material risks, to help ensure Big Society Capital is well placed to Further information on the nature of these risks and how meet its priorities and longer-term strategic goals. An they are managed by Big Society Capital is set out below. assessment of the extent to which actual risk profile is within agreed risk appetite, is reported regularly to the Strategic Risks Board and senior management using a broad set of key Risk Appetite: High risk indicators – these help provide clarity on the scale The risks arising from the design and execution of Big and type of activities that can be undertaken in a manner Society Capital’s business strategy and business model that is easily conveyed. that may lead to financial loss, adverse social impact, failure to deliver its mission in a broader and evolving impact investment market. The company also faces risks that it acts in a way that falls short of stakeholder Enhancements to Big Society expectations and causes reputational damage. Big Society Capital’s Risk Framework in Capital seeks to mitigate these risks through a strong governance framework, including the setting of clear 2020 strategic goals and an active programme of engagement with key stakeholders. A number of enhancements to Big Society Capital’s risk framework have been developed in 2020. These include: Performance/Investment Risks Risk Appetite: High • Formal consideration twice yearly by ARCC of longer- The risk of financial and social impact losses as a result term emerging/horizon type risks that could affect of loss of value of social impact investments, failure of future results and performance. a counterparty to meet its obligations in accordance • Inclusion of risks related to climate change and other with agreed terms, desired social impact not achieved, environmental issues as key short-term and longer- and the risk of reduced mobilisation of co-investment. term risk areas, together with initial steps to develop a These risks are mitigated through the Investment robust framework for consideration of these. Committee and Valuation Committee frameworks, which consider investments from financial, social impact and • Assessment of risks to Big Society Capital and its systems change perspectives and through concentration portfolio arising from the Covid-19 pandemic. These thresholds on fund managers and allocation judgements include risks relating to portfolio return, social impact for product types. achieved and staff wellbeing that have been identified as significant, with business continuity risks for the As Big Society Capital’s Social Impact Investment company itself not considered material, given actions Portfolio grows, risks associated with future liquidity and taken to mitigate these risks. achievement of investment exits become more significant. • A number of steps taken to enhance the risk Such risks are mitigated through a quarterly review of framework and monitoring in the light of Big Society long-term liquidity requirements, including consideration Capital’s role as Portfolio Manager of the Schroder of stress-type scenarios, together with identification of BSC Social Impact Trust plc (SBSI), which launched in possible liquidity mitigants and a policy approved by the December 2020. Board that projected liquidity availability should exceed 80% of Big Society Capital’s undrawn social impact • Embedding of Risk Champions in each of Big Society investment commitments. Capital’s three teams, and their regular input into the company’s consideration of key risk areas, together In addition, Big Society Capital runs programmes to with stronger dissemination of risk awareness and risk support and develop fund managers, and seeks to develop culture across these teams. wider institutional relationships, to bring increased capital • Selection of a leading accountancy firm to provide flows closer to its strategic focus areas. outsourced Internal Audit services commencing in 2021. Further detail on the key financial risks facing Big Society Capital and the steps taken to manage them are outlined in Note 14 – Financial risk management and financial instruments below.

Big Society Capital Limited Report and Financial Statements 2020 25 Strategic Report

External Risks In order to provide a stronger level of external assurance Risk Appetite: High in respect of the adequacy and effectiveness of key The risk of government policy, regulatory changes, internal controls in 2021, a rolling programme of internal adverse macro-economic trends and other external audit reviews will commence by a specialist external factors such as Covid-19 and climate change impacting provider, with twice-yearly reporting of these reviews to the performance of Big Society Capital’s Social Impact ARCC. Investment Portfolio and its pipeline. Such risks are often outside the company’s direct control, with mitigation through the diversified nature of its portfolio and low correlation of elements of the portfolio with wider market performance factors. This report was approved by the Board on 23 April 2021 Big Society Capital’s activities and a number of areas of its and signed on its behalf. Social Impact Investment Portfolio have been significantly affected by Covid-19. Following emergence of the pandemic, regular meetings of the Board were convened to oversee key risks and challenges, and to shape the company’s response. In conjunction with Big Society Capital’s fund manager partners, a number of Covid-19 Sir Harvey McGrath Director response measures were implemented in respect of its Social Impact Investment Portfolio, including interest and repayment holidays. Also notwithstanding the challenging environment at the time, Big Society Capital and fund manager partners established the Resilience and Recovery Loan Fund to provide working capital finance to support charities and social enterprises facing shortfalls, due to expected income and activity having been delayed or disrupted.

During the Covid-19 outbreak, Big Society Capital’s Business Continuity Plan has been invoked, and employees have successfully transitioned to a remote working basis during a period of significant activity, as the company developed its Covid-19 response measures. The necessity of remote working for a prolonged period brings with it potential risks to staff wellbeing. In this regard Big Society Capital has supported colleagues with increased use of various online communication and support resources, regular staff surveys, assistance with home office equipment, a programme of health and wellbeing support, and greater flexible working arrangements for all staff including those with caring responsibilities.

Operational/Preventable Risks Risk Appetite: Low In addition to heightened people-related risks as a result of Covid-19 as outlined above, Big Society Capital also faces risks that it does not create a working environment and culture to attract, develop, motivate and retain sufficient people resource to meet its objectives. To mitigate such risks the company has developed a comprehensive People Strategy to support attraction and retention of talent, with particular focus on staff development, onboarding and development of a supportive and enabling culture.

Big Society Capital is also exposed to a range of operational risks, including cyber risks, resulting from inadequate or failed internal processes and key systems. These types of risk are mitigated by having policies, processes, controls and procedures in place, together with suitably qualified and experienced staff in place to oversee these.

26 Big Society Capital Limited Report and Financial Statements 2020 Strategic Report Corporate Governance

Big Society Capital Limited Report and Financial Statements 2020 27 Corporate Governance Report

Big Society Capital has two Board Committees, each Big Society Capital Limited (Big comprising non-executive directors, with external Society Capital) is a social impact- members providing specific expertise: led investor, which exists to improve • The Nominations and Remuneration Committee (N&RC) – responsible for making recommendations concerning the lives of people in the UK through the appointment of directors, particularly for ensuring that there is an even balance on the Board between investment with a sustainable return. individuals with the appropriate depth of experience Big Society Capital’s object is to act and expertise in the financial and social sectors; and Board diversity. It also has responsibility for setting as a social investment wholesaler levels of executive remuneration, and monitors and to promote the development activities related to the company’s People Strategy. • The Audit, Risk and Compliance Committee of the social impact investment (ARCC) – responsible for overseeing management marketplace in the UK. processes and other arrangements to ensure the appropriateness and effectiveness of systems and controls, including risk management. Working with expert partners, we seek to understand Big Society Capital has three other operational committees: people’s needs first. Then, using our knowledge and capital, we collaborate and invest with fund managers • The Executive Committee is chaired by the CEO and and social banks who also want to create a better, is responsible for the day-to-day running of Big sustainable future. Society Capital. • The Investment Committee comprises Board and They, and the social enterprises and charities they invest Executive Committee members and is responsible for in, create the impact. Our role is to bring the most relevant making investments and for the performance of Big experts from our network to the table, generating ideas Society Capital’s portfolio of investments and reporting and connecting capital to where it’s most needed. its activities to the Board. All investments over £10 million also require approval by the Board. It is chaired The company is authorised by the Financial Conduct by the CEO of Big Society Capital or delegated to Authority (Firm Number: 568940). an alternative member of the Committee (normally the Deputy Chair of the Investment Committee). All Board members have a standing invitation to observe Big Society Capital the Investment Committee. There is a separate Investment Committee established purely in respect Big Society Capital obtains its capital from two streams: of the portfolio management for SBSI. dormant bank accounts – in accordance with the Dormant • The Valuation and Performance Committee comprises Bank and Building Society Accounts Act 2008 (invested via Board and Executive Committee members. Its the Oversight Trust – Assets for the Common Good (the role is to agree the valuation of social investments Oversight Trust) which holds “A” shares), and four major UK made by the company (Valuation) and to review high street banks: Barclays, HSBC, Lloyds Banking Group how Big Society Capital’s portfolio of investments is and NatWest Group (which hold “B” shares). performing against the original investment thesis from an overall, financial, impact on people and systems The Oversight Trust is the majority shareholder of Big change perspective (Performance). This includes Society Capital and provides oversight with the aim of identifying key risks and issues within Big Society ensuring that Big Society Capital remains true to its Capital’s investment portfolio. It is chaired by the CFO object of promoting and developing social investment of Big Society Capital (who is not a member of the and the social investment market in the United Kingdom. Investment Committee). Members of ARCC and the company auditors are invited to observe meetings of The composition of the Big Society Capital Board reflects the Valuation and Performance Committee. its purpose and includes directors with financial and/ or social sector expertise. The Board comprises non- executive directors only at the year-end (including one who is nominated by the shareholder banks). When a The Oversight Trust – permanent CEO is in place (Big Society Capital has been Assets for the Common Good operating under an Interim CEO since May 2020), the CEO holds an executive Board position. The Oversight Trust is the majority shareholder in Big Society Capital. The Oversight Trust’s role, in relation to The Board meets at least five times a year, and there Big Society Capital, is to ensure that it remains true to is an annual review of the effectiveness of the Board its mission. Reflecting its strategic remit, the Oversight (including the Senior Independent Director providing Trust Board comprises individuals with a balance of feedback on the Chair’s performance). relevant skills and experience, and includes a nominee

28 Big Society Capital Limited Report and Financial Statements 2020 Corporate Governance Report

of the Government Department of Digital, Culture, director, the banks receive all Big Society Capital Media & Sport (DCMS) and a nominee of the National Board papers and quarterly and half-yearly reports. Lottery Community Fund. In certain circumstances the banks have the right to request a meeting with the senior management of Big In November 2019, the Oversight Trust took on new Society Capital, to discuss its performance, however oversight responsibilities for entities receiving funding the CFO also maintains regular informal contact with all (designated for expenditure in England) under the shareholder banks’ representatives. Dormant Bank and Building Society Accounts Act 2008. In addition to being the majority shareholder of Big Society Capital, the Oversight Trust also has responsibilities as the sole corporate member of: Access Big Society Capital – The Foundation for Social Investment, Fair4All Finance Advisory Board and Youth Futures Foundation. The Big Society Capital CEO has established an Advisory The Oversight Trust Board meets formally at least five Board to advise on aspects of Big Society Capital’s times a year. Information about Big Society Capital, in strategy and activities. The Advisory Board is made up respect of its financial standing, portfolio, strategy, of individuals with specific interest and involvement board composition and performance, is provided to in social impact investment, including prominent each regular quarterly meeting, and the Oversight practitioners from the sector. The Advisory Board is Trust Board focuses one meeting a year specifically a consultative committee with no decision-making on developments at Big Society Capital. There is also powers, though its input is frequently used to inform an annual governance meeting with representatives projects or decisions, which the CEO may then take to of the Big Society Capital Board and management, to the Big Society Capital Board. Copies of the minutes of discuss governance issues. In addition to these formal Advisory Board meetings are provided to the Chair of procedures, Big Society Capital maintains an ongoing the Big Society Capital Board. open and transparent relationship with the Oversight Trust, in particular between the respective Chairs. The Oversight Trust is not involved in making investment decisions or other operational issues. Advisory Board members

In addition, the Oversight Trust commissions an as at 31 December 2020 independent Quadrennial Review on a rotational basis, to examine the effectiveness of each of its subsidiary Carol Mack, Association of Charitable Foundations companies in delivering against its object as set out in Clara Barby, Oversight Trust its governance documents. The first of these reviews Danyal Sattar, Big Issue Invest was performed on Big Society Capital in 2020. For more David Hutchison, Social Finance detail please see: https://bigsocietycapital.com/latest/ Mark Simms, P3 big-society-capital-quadrennial-review/. Nick Temple, Social Investment Business Richard Brass Berenberg, IVUK, Arts Impact Fund To enable it to carry out its role, the Oversight Trust Sara Llewellyn, Barrow Cadbury Trust has a controlling interest in Big Society Capital. It has Whitni Thomas, Triodos 80% of the voting rights at shareholders’ meetings. For important issues, such as any change to the company’s Articles concerning its objects or powers, a consensus vote by the Oversight Trust Board is required. The Big Society Capital Staff Council

The Big Society Capital Staff Council, a representative Shareholder Banks group of staff from across the business, was established by the CEO in autumn 2020. It meets quarterly to Each of the shareholder banks (Barclays, HSBC, Lloyds consider important issues facing Big Society Capital, Banking Group and NatWest Group) has subscribed £50 including reviewing and contributing views on some million of Big Society Capital’s shares. Their individual items before they go to the Board. Key points from shareholdings will always be less than 10% of the paid-in these discussions are reported to the Big Society Capital capital, currently 7.98%. Board at each meeting, through the CEO Report.

The banks can vote at shareholders’ meetings. Their votes are in proportion to their shareholding, but each is capped at 5% of the overall voting rights. The banks together have the right to nominate one director to the Big Society Capital Board (currently Stuart Foster). In addition to information provided to them by that

Big Society Capital Limited Report and Financial Statements 2020 29 Corporate Governance Report Remuneration Report

30 Big Society Capital Limited Report and Financial Statements 2020 Remuneration Report Remuneration Report

This report covers the 12 months ended 31 December 2020, and sets out the policy and disclosures in relation to the remuneration of the employees and directors of Big Society Capital.

The Nominations and Remuneration Committee (N&RC) Principles for executive is appointed by the Board of the company and makes recommendations on these issues to it. remuneration

N&RC is responsible for establishing a formal and • Executive directors and the senior executive team transparent procedure for setting the remuneration will be paid a comparable remuneration package to policy for the executive staff of the company, and for persons engaged in similar positions in the public determining the remuneration packages of executive or not-for-profit sectors, as appropriate. staff. It also leads the process for setting non-executive • The senior executive team will not be paid any directors’ fees. bonuses.

N&RC’s responsibilities regarding remuneration are to: • make recommendations to the Board of the Principles for non-executive company in relation to the remuneration of directors and senior executives; remuneration • make recommendations to the Board of the company in relation to the identity and terms of • Non-executive directors will be offered an appointment of independent consultants for the equivalent sum paid by other comparable public conduct of an independent salary survey, at least bodies and not-for-profit organisations, such as once every five years; housing associations. • establish the benchmark for remuneration • In 2020, the amounts were £8,190 (2019: £8,055) packages for persons engaged in similar positions per annum for the service of acting as a non- in the public, not-for-profit or charity sectors; executive director, £3,490 (2019: £3,430) per • review the ongoing appropriateness and relevance annum for chairing a Board Committee and £1,745 of the company remuneration, pensions and (2019: £1,715) per annum for acting as a non-chair employment benefits policies; member of a Committee. In addition, £5,365 (2019: • determine the total individual remuneration £5,275) per annum is offered to a non-executive package of senior executives in consultation director who acts as a member of the Investment with the Chair and/or CEO of the company, as Committee. These amounts are reviewed by Big appropriate; Society Capital annually in the light of inflation and • review on an annual basis the remuneration of non- non-executive remuneration levels at comparable executive directors; organisations. • ensure that contractual terms on termination, and • Total non-executive directors’ fees in 2020 were any payments made, are fair to the individual and £93,774 (2019: £77,575). the company; • oversee any major changes in the nature of employee benefits provided by the company; • approve the Annual Remuneration Code Assessment; and • agree the policy for authorising claims for expenses from the directors.

Big Society Capital Limited Report and Financial Statements 2020 31 Remuneration Report

Higher-paid employees Gender pay data

The total number of employees, including directors, with Big Society Capital published its latest gender pay gap annual remuneration of £60,000 or more and employed information on its website in summer 2020: https:// as at the period end were as follows: bigsocietycapital.com/about-us/careers/gender-pay- gap-2019/. This showed a gender pay gap of 21% 2020 2019 compared to 28% the previous year. During the year Number Number Big Society Capital has actively pursued a number of initiatives including an independent diversity and £60,000 – £69,999 13 9 inclusion review, development of flexible working, £70,000 – £79,999 10 9 and ensuring all vacancies are able to reach diverse networks to help further reduce the gender pay gap. £80,000 – £89,999 3 1 £90,000 – £99,999 - 1 £100,000 – £109,999 1 2 £110,000 – £119,999 3 3 £150,000 – £159,999 1 1

30 (2019: 24) of these employees participate in the company pension scheme. Employees make a contribution of up to 8% of salary to the pension scheme. The company matches the employee contributions and pays an additional 3% of salary.

The total number of employees at 31 December 2020 was 72 and at 31 December 2019 was 71.

The ratio of highest salary to lowest salary is 8.33 (2019: 6.68). The increase in this ratio is attributable to the introduction of apprenticeship places during the year, as described in the Strategic Report on page 5 above. A benchmarking exercise was carried out in setting these salary levels, which included adherence to the London Living Wage.

32 Big Society Capital Limited Report and Financial Statements 2020 Directors’ Report Directors’ Report

The directors present their report and financial statements for the year ended 31 December 2020.

Directors Statement of directors’

The following persons served as directors during the year: responsibilities in respect • Sir Harvey McGrath (Chair) of the Strategic Report, • Lesley-Anne Alexander CBE • Paola Bergamaschi Broyd the Directors’ Report and (resigned from the Board on 7 May 2020) the financial statements • Kieron Boyle • Chris Wright The directors are responsible for preparing the Strategic • Fiona Ellis Report, the Directors’ Report and the financial statements • Stuart Foster in accordance with applicable law and regulations. • Alan Giddins • David Hunter Company law requires the directors to prepare financial • Christina McComb OBE statements for each financial year. Under that law they • Cliff Prior CBE (resigned from the Board on 31 May 2020) have elected to prepare the financial statements in • Anne Wade accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in Dividends the UK and Republic of Ireland. Under company law the directors must not approve the The directors do not recommend the payment of a financial statements unless they are satisfied that they dividend for the year (2019: £nil). give a true and fair view of the state of affairs of the company and of the profit or loss of the company for Directors’ indemnity that period. In preparing these financial statements, the directors are required to: The company arranges directors’ and officers’ liability insurance to cover certain liabilities and defence costs. • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable Greenhouse Gas Emissions and prudent; • state whether applicable UK Accounting Standards The company considers itself to be a low energy user have been followed, subject to any material departures under the Streamlined Energy and Carbon Reporting disclosed and explained in the financial statements; regulations and therefore is not required to disclose • assess the company’s ability to continue as a going energy and carbon information. Accordingly, no such concern, disclosing, as applicable, matters related to information has been disclosed. going concern; and • use the going concern basis of accounting unless they Pillar III disclosures either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. The company makes disclosures on its website – www.bigsocietycapital.com – setting out the company’s capital resources, risk exposures and risk management processes.

Big Society Capital Limited Report and Financial Statements 2020 33 Directors’ Report

The directors are responsible for keeping adequate Disclosure of information accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable to auditors accuracy at any time the financial position of the company and enable them to ensure that the financial statements Each person who was a director at the time this report comply with the Companies Act 2006. They are was approved confirms that: responsible for such internal control as they determine • so far as they are aware, there is no relevant audit is necessary to enable the preparation of financial information of which the company’s auditor is statements that are free from material misstatement, unaware; and whether due to fraud or error, and have general • they have taken all the steps that they ought to have responsibility for taking such steps as are reasonably taken as a director in order to make themselves aware open to them to safeguard the assets of the company of any relevant audit information and to establish that and to prevent and detect fraud and other irregularities. the company’s auditor is aware of that information.

This report was approved by the Board on 23 April 2021 The directors are responsible for the maintenance and and signed on its behalf. integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Sir Harvey McGrath Director

34 Big Society Capital Limited Report and Financial Statements 2020 Independent Auditor’s Report Independent Auditor’s Report to the members of Big Society Capital Limited

Opinion Going concern

We have audited the financial statements of Big Society The directors have prepared the financial statements Capital Limited (“the company”) for the year ended on the going concern basis as they do not intend to 31 December 2020, which comprise the Statement of liquidate the company or to cease its operations, and Comprehensive Income, Statement of Financial Position, as they have concluded that the company’s financial Statement of Changes in Equity and Statement of Cash position means that this is realistic. They have also Flows and related notes, including the accounting concluded that there are no material uncertainties policies in note 1. that could have cast significant doubt over its ability to continue as a going concern for at least a year from the In our opinion the financial statements: date of approval of the financial statements (“the going • give a true and fair view of the state of the company’s concern period”). affairs as at 31 December 2020 and of its profit for the year then ended; In our evaluation of the directors’ conclusions, we • have been properly prepared in accordance with UK considered the inherent risks to the company’s business accounting standards, including FRS 102 The Financial model and analysed how those risks might affect the Reporting Standard applicable in the UK and Republic company’s financial resources or ability to continue of Ireland; and operations over the going concern period. • have been prepared in accordance with the requirements of the Companies Act 2006. Our conclusions based on this work: • we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; Basis for opinion • we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty We conducted our audit in accordance with International related to events or conditions that, individually Standards on Auditing (UK) (“ISAs (UK)”) and applicable or collectively, may cast significant doubt on the law. Our responsibilities are described below. We company’s ability to continue as a going concern for have fulfilled our ethical responsibilities under, and are the going concern period. independent of the company in accordance with UK ethical requirements including the FRC Ethical Standard. However, as we cannot predict all future events or We believe that the audit evidence we have obtained is a conditions and as subsequent events may result in sufficient and appropriate basis for our opinion. outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the company will continue in operation.

Big Society Capital Limited Report and Financial Statements 2020 35 Independent Auditor’s Report

As the company is regulated, our assessment of risks Fraud and breaches of laws and involved gaining an understanding of the control regulations – ability to detect environment including the entity’s procedures for complying with regulatory requirements. Identifying and responding to risks of material misstatement due to fraud We communicated identified laws and regulations To identify risks of material misstatement due to fraud throughout our team and remained alert to any (“fraud risks”) we assessed events or conditions that indications of non-compliance throughout the audit. could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk The potential effect of these laws and regulations assessment procedures included: on the financial statements varies considerably. • enquiring of directors and the Audit, Risk and Compliance Committee as to the company’s policies Firstly, the company is subject to laws and regulations and procedures to prevent and detect fraud as well as that directly affect the financial statements including whether they have knowledge of any actual, suspected financial reporting legislation (including related or alleged fraud; companies legislation), distributable profits legislation • reading the company’s and the Audit, Risk and and taxation legislation and we assessed the extent of Compliance Committee meeting minutes; compliance with these laws and regulations as part of • considering remuneration incentive schemes and our procedures on the related financial statement items. performance targets; and • using analytical procedures to identify any usual or Secondly, the company is subject to many other laws unexpected relationships. and regulations where the consequences of non- compliance could have a material effect on amounts We communicated identified fraud risks throughout or disclosures in the financial statements, for instance the audit team and remained alert to any indications of through the imposition of fines or litigation or the loss fraud throughout the audit. of the company’s regulatory permissions. We identified the following areas as those most likely to have such As required by auditing standards and taking an effect: health and safety, anti-bribery, employment into account our overall knowledge of the control law, regulatory capital and liquidity and certain aspects environment, we perform procedures to address the of company legislation recognising the financial and risk of management override of controls, in particular regulated nature of the company’s activities and its the risk that management may be in a position to make legal form. Auditing standards limit the required audit inappropriate accounting entries. On this audit we procedures to identify non-compliance with these do not believe there is a fraud risk related to revenue laws and regulations to enquiry of the directors and recognition because revenue is generated from few other management and inspection of regulatory sources and transactions are easily verifiable to external correspondence, if any. Therefore if a breach of sources or agreements with little or no requirement for operational regulations is not disclosed to us or evident estimation from management. We did not identify any from relevant correspondence, an audit will not detect additional fraud risks. that breach.

We performed procedures including identifying journal Context of the ability of the audit to detect fraud or entries to test based on risk criteria and comparing the breaches of law or regulation identified entries to supporting documentation. These Owing to the inherent limitations of an audit, there is an included journals posted to investments and cash. unavoidable risk that we may not have detected some material misstatements in the financial statements, Identifying and responding to risks of material even though we have properly planned and performed misstatement due to non-compliance with laws our audit in accordance with auditing standards. For and regulations example, the further removed non-compliance with We identified areas of laws and regulations that could laws and regulations is from the events and transactions reasonably be expected to have a material effect on reflected in the financial statements, the less likely the financial statements from our general commercial the inherently limited procedures required by auditing and sector experience and through discussion with standards would identify it. the directors and other management (as required by auditing standards), and from inspection of the In addition, as with any audit, there remained a company’s regulatory correspondence, and discussed higher risk of non-detection of fraud, as these may with the directors and other management the policies involve collusion, forgery, intentional omissions, and procedures regarding compliance with laws misrepresentations, or the override of internal controls. and regulations. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

36 Big Society Capital Limited Report and Financial Statements 2020 Independent Auditor’s Report

Other information Auditor’s responsibilities

The directors are responsible for the other information, Our objectives are to obtain reasonable assurance which comprises the Strategic Report, Corporate about whether the financial statements as a whole are Governance Report, Remuneration Report and free from material misstatement, whether due to fraud Directors’ Report. Our opinion on the financial or error, and to issue our opinion in an auditor’s report. statements does not cover the other information and, Reasonable assurance is a high level of assurance, accordingly, we do not express an audit opinion or, but does not guarantee that an audit conducted in except as explicitly stated below, any form of assurance accordance with ISAs (UK) will always detect a material conclusion thereon. misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, Our responsibility is to read the other information and, individually or in aggregate, they could reasonably be in doing so, consider whether, based on our financial expected to influence the economic decisions of users statements audit work, the information therein is materially taken on the basis of the financial statements. misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work: A fuller description of our responsibilities is • we have not identified material misstatements in the provided on the FRC’s website at www.frc.org.uk/ other information; auditorsresponsibilities. • in our opinion the information given in the Strategic Report and the Directors’ Report is consistent with the financial statements; and • in our opinion those reports have been prepared in The purpose of our audit accordance with the Companies Act 2006. work and to whom we owe Matters on which we are required to report by exception Under the Companies Act 2006 we are required to report our responsibilities to you if, in our opinion: • adequate accounting records have not been kept, or This report is made solely to the company’s members, returns adequate for our audit have not been received as a body, in accordance with Chapter 3 of Part 16 of from branches not visited by us; or the Companies Act 2006. Our audit work has been • the financial statements are not in agreement with the undertaken so that we might state to the company’s accounting records and returns; or members those matters we are required to state to • certain disclosures of directors’ remuneration them in an auditor’s report and for no other purpose. specified by law are not made; or To the fullest extent permitted by law, we do not accept • we have not received all the information and or assume responsibility to anyone other than the explanations we require for our audit. company and the company’s members, as a body, for our audit work, for this report, or for the opinions we We have nothing to report in these respects. have formed.

Directors’ responsibilities

As explained more fully in their statement set out Richard De La Rue on page 32, the directors are responsible for: the (Senior Statutory Auditor) preparation of the financial statements and for being for and on behalf of KPMG LLP, satisfied that they give a true and fair view; such internal Statutory Auditor control as they determine is necessary to enable the preparation of financial statements that are free from Chartered Accountants material misstatement, whether due to fraud or error; 15 Canada Square assessing the company’s ability to continue as a going London E14 5GL concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of 23 April 2021 accounting unless they either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Big Society Capital Limited Report and Financial Statements 2020 37 38 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

Statement of Comprehensive Income 40

Statement of Financial Position 41

Statement of Changes in Equity 42

Statement of Cash Flows 43

Notes to the Financial Statements 44

Big Society Capital Limited Report and Financial Statements 2020 39 Financial Reports Statement of Comprehensive Income

For the year ended 31 December 2020

Notes 2020 2019 £ 000 £ 000

Income 7,508 8,141 Investment gains/(losses) 4,341 (2,470) Total Revenue 2 11,849 5,671 Other income 3 115 144 Administrative and other expenses 4 (8,339) (7,947) Operating profit/(loss) 3,625 (2,132)

Profit/(loss) on ordinary activities before taxation 3,625 (2,132) Tax credit on gain/(loss) on ordinary activities 6 62 6 Profit/(loss) for the financial year 3,687 (2,126) Other comprehensive income - - Total comprehensive profit/(loss) for the year 3,687 (2,126)

The results above relate to continuing operations. The notes on pages 44-64 form part of these Financial Statements.

40 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports Statement of Financial Position

For the year ended 31 December 2020

Notes 2020 2019 £ 000 £ 000

Fixed assets Intangible assets 7 17 25 Tangible assets 8 95 111 Investments 9 311,645 270,443 311,757 270,579 Current assets Debtors 10 1,477 684 lnvestments 11 226,636 269,166 Cash at bank and in hand 65,852 16,274 293,965 286,124 Creditors: amounts falling due 12 (1,225) (889) within one year Net current assets 292,740 285,235

Total assets less current liabilities 604,497 555,814 Provisions for liabilities Deferred taxation 13 (19) (23) 604,478 555,791

Capital and reserves Called-up share capital 16 626,345 581,345 Profit and loss account 17 (21,867) (25,554) Total equity 604,478 555,791

The notes on pages 44-64 form part of these Financial Statements. Approved by the Board on 23 April 2021 and signed on its behalf

Sir Harvey McGrath Director

Company registration number: 07599565

Big Society Capital Limited Report and Financial Statements 2020 41 Financial Reports Statement of Changes in Equity

For the year ended 31 December 2020

Share Share Other Profit Total capital premium reserves and loss account £ 000 £ 000 £ 000 £ 000 £ 000

At 1 January 2019 581,345 – – (23,428) 557,917 Loss for the financial year – – – (2,126) (2,126) At 31 December 2019 581,345 – – (25,554) 555,791

At 1 January 2020 581,345 – – (25,554) 555,791 Gain for the financial year – – – 3,687 3,687 Shares issued 45,000 – – – 45,000 At 31 December 2020 626,345 – – (21,867) 604,478

The notes on pages 44-64 form part of these Financial Statements.

42 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports Statement of Cash Flows

For the year ended 31 December 2020

Notes 2020 2019 £ 000 £ 000

Operating activities Operating profit/(loss) 3,625 (2,132) Adjustments for: Depreciation and amortisation 91 127 3,716 (2,005) (Increase)/decrease in debtors (160) (155) Increase/(decrease) in creditors 336 122 3,892 (2,038) Returns on fixed asset investments (3,363) 6,596 Returns on current asset investments (3,961) (4,423) Foreign exchange (losses) (164) (359) Corporation tax received 58 5 Cash used in operating activities (3,538) (219)

Investing activities and interest Payments to acquire tangible and intangible fixed assets (67) (85) Payments to acquire fixed asset investments (100,805) (74,308) Repayment of loans 34,323 13,958 Proceeds from sale of fixed asset investments 28,700 3,454 Proceeds from sale of current asset investments 55,986 39,871 Cash generated/(used) in investing activities 18,137 (17,110)

Financing activities Proceeds from the issue of shares 45,000 – Cash generated by financing activities 45,000 –

Net cash generated/(used) Cash used in operating activities (3,538) (219) Cash generated/(used) in investing activities 18,137 (17,110) Cash generated by financing activities 45,000 – Net cash generated/(used) 59,599 (17,329) Cash and cash equivalents at 1 January 27,850 45,179 Cash and cash equivalents at 31 December 18 87,449 27,850 Cash and cash equivalents comprise: Cash at bank 65,852 16,274 Current asset investments (Maturity less than 3 months from the date of acquisition) 21,597 11,576 18 87,449 27,850

The notes on pages 44-64 form part of these Financial Statements.

Big Society Capital Limited Report and Financial Statements 2020 43 Notes

44 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports Notes to the Financial Statements

For the year ended 31 December 2020

1. Summary of significant do not believe these will significantly impact the overall liquidity of the company over the next 12 months accounting policies and that the company has sufficient existing treasury balances to enable it to meet its investment and other Basis of preparation obligations and to continue in operational existence The financial statements have been prepared in for at least 12 months from the date of approval of the accordance with FRS 102, The Financial Reporting financial statements. Further information on this is set Standard applicable in the UK and Republic of Ireland. out in the Strategic Report from page 5. For this reason, the directors have adopted the going concern basis in The financial statements have been prepared under the preparing these financial statements. historical cost convention, except for certain financial instruments which are stated at their fair value, as Revenue detailed in the ‘Basic financial instruments’ accounting Revenue comprises income and gains/losses on the policy below. Social Impact Investment and Treasury Portfolios. Revenue is recognised on an accruals basis throughout The financial statements are presented in thousands of the year when it is probable that the economic benefits pounds sterling, which is the company’s functional currency. will flow to the company.

Use of judgements and estimates Foreign currency The preparation of the financial statements in Transactions in foreign currencies are translated to the conformity with applicable UK GAAP requires company’s functional currency at the foreign exchange management to make judgements, estimates and rate ruling at the date of the transaction. Monetary assumptions that affect the application of accounting assets and liabilities denominated in foreign currencies policies and the reported amounts of assets, liabilities, at the Statement of Financial Position date are translated income and expenses. Actual results may differ from to the functional currency (pound sterling) at the foreign these estimates. Estimates and underlying assumptions exchange rate ruling at that date. Foreign exchange are reviewed on an ongoing basis. differences arising on translation are recognised in the Statement of Comprehensive Income. The most significant area of judgement is the determination of fair values for investments. This is Subsidiaries and Associates held as part of an discussed below, in the accounting policy ‘Basic financial investment portfolio instruments – iii) Fair value measurement’. The company has investments that may be regarded as subsidiary or associated undertakings, which might Going concern require these to be consolidated using the equity method The financial statements have been prepared on of accounting. As these investments are held as part of the going concern basis. The company has incurred an investment portfolio, they have not been consolidated cumulative losses since inception of £21.9m, turning in the accounts of the company, and are measured at fair a profit this year of £3.7m. The company had cash value with changes in fair value recognised in profit or and current asset investments of £292.5m at the year loss in accordance with FRS 102 14.4B. end, having been capitalised with £626.3m of equity investment since inception. The directors have reviewed Government grants the company’s future liquidity projections in the light Government grants are included within deferred income of the impact of the Covid-19 pandemic and potential in the Statement of Financial Position and credited implications of this on future company operations. to the Statement of Comprehensive Income over the While there are significant wider market uncertainties expected useful lives of the assets to which they relate which may impact portfolio investments, the directors or in the period in which the related costs are incurred.

Big Society Capital Limited Report and Financial Statements 2020 45 Financial Reports

Interest Note 14 – Financial risk management and financial Interest income is recognised either using the effective instruments, provides a reconciliation of line items in interest method or on an accruals basis, depending the Statement of Financial Position to the categories of upon whether the financial asset is measured at financial instruments. ‘amortised cost’ or whether it has been designated upon initial recognition as at ‘fair value through profit or loss’. iii.) Fair value measurement As described in Note 15 – Valuation of financial The effective interest rate is the rate that exactly instruments, the company uses a three-level hierarchy discounts the estimated future cash payments and for fair value measurement disclosure. Fair value is the receipts through the expected life of the financial amount for which an asset could be exchanged, or a instrument to the carrying amount of the financial liability settled, between knowledgeable, willing parties in instrument. When calculating the effective interest rate, an arm’s length transaction on the measurement date. the company estimates future cash flows considering all contractual terms of the financial instrument, but not In determining a fair value using Level 3 valuation future credit losses. techniques, the company applies the principles included in the International Private Equity and Venture Capital Net gains or losses from financial assets Valuation Guidelines (2018 edition): designated as at fair value through profit or loss Net gains or losses from financial assets designated as Where an investment has been made recently, or where at fair value through profit or loss includes all realised and there has been subsequent, significant new investment unrealised fair value changes, but excludes interest income. into the company, a more accurate valuation is not available and there is no evidence to suggest that the Basic financial instruments unadjusted Price of Recent Investment is no longer i.) Recognition and initial measurement relevant, the company may apply the Price of Recent Financial assets designated as at fair value through Investment, for a limited period following the date of profit or loss are recognised initially at fair value, with the relevant transaction. Where it is felt that there has transaction costs recognised in profit or loss. Financial been a change to the milestones or benchmark then assets or financial liabilities not at fair value through the company will use the Price of Recent Investment profit or loss are recognised initially at fair value plus adjusted to reflect milestone/benchmark analysis. transaction costs that are directly attributable to their acquisition or issue. Where appropriate and reasonable earnings or revenue multiples are available for comparable businesses, the Investments within the Social Impact Investment company will apply the Multiples valuation technique to Portfolio, in which the company has controlling or derive a value for the investment. significant influence, are held as part of an investment portfolio, rather than qualifying as subsidiaries or If industry benchmarks can be applied to the investment associates. The company recognises its investments to derive a fair value, these will be applied. within the Statement of Financial Position, on the date on which investments are signed and drawn down. If future cash flows can be reasonably estimated, and it Additionally the company discloses commitments at two is felt that the risks, due to the high level of subjectivity, distinct stages: commitments contracted but not drawn involved in applying the Discounted Cash Flow method down, and in-principle commitments. Details are set out do not render the method insufficiently reliable, this will in Note 20 – Capital commitments. be applied. ii.) Classification Where a regular Net Asset Valuation is available for The company classifies its basic financial instruments the investment, the company will assess this for into the following categories: reasonableness and consider whether the investment can be valued on the basis of the underlying fair value of Financial assets at fair value through profit or loss its assets, rather than its earnings. If this is considered • Designated as at fair value through profit or loss – appropriate the company will apply the Adjusted Net debt, equity, fund and social impact bond investments Asset Valuation method. and derivative financial instruments. Financial assets at amortised cost The company may decide to use a combination of • Debt investments meeting the conditions set out in FRS the mentioned methods, or other methods that are 102.11, cash at bank and in hand, cash deposits (included considered more appropriate to derive the fair value of in investments held as current assets), and other debtors. its investments. Financial liabilities at amortised cost iv.) Impairment • Creditors. A financial asset not classified at fair value through profit Financial liabilities at fair value through profit or loss or loss is assessed at each reporting date, to determine • Derivative financial instruments. whether there is objective evidence of impairment. A financial asset or a group of financial assets is impaired if there is objective evidence of impairment as a result

46 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

of one or more events that occurred after the initial Taxation recognition of the asset(s), and that loss event(s) had Tax on the profit or loss for the year comprises current an impact on the estimated future cash flows of that and deferred tax. Tax is recognised in the profit and asset(s) that can be estimated reliably. loss account except to the extent that it relates to items recognised directly in equity or other comprehensive v.) Derivative financial instruments income, in which case it is recognised directly in equity The company holds derivative financial instruments or other comprehensive income. to manage its exchange risk exposure from its USD and EUR denominated financial assets. Derivatives are Current tax is the expected tax payable or receivable on recognised initially at fair value, with any attributable the taxable income or loss for the year, using tax rates transaction costs recognised in the profit and loss enacted or substantively enacted at the balance sheet account as incurred. After initial recognition derivatives date, and any adjustment to tax payable in respect of are measured at fair value and changes recognised in the previous years. profit and loss account as incurred, the fair value reflects the estimated amount the company would receive or pay Deferred tax is provided on timing differences which in an arm’s length transaction. This amount is determined arise from the inclusion of income and expenses in tax based on observable exchange rates. assessments in periods different from those in which they are recognised in the financial statements. vi.) Offsetting Financial assets and liabilities are offset and the net Deferred tax is measured using the tax rates and laws amount presented in the Statement of Financial Position that have been enacted or substantively enacted by the when, and only when, the company has a legal right to reporting date and that are expected to apply to the offset the amounts and intends either to settle on a reversal of the timing difference. net basis or to realise the asset and settle the liability simultaneously. At Budget 2020, the government announced that the Corporation Tax main rate (for all profits except ring- Income and expenses are presented on a net basis fenced profits) for the years starting 1 April 2020 and only when permitted under UK GAAP e.g. for gains and 2021 would remain at 19%. losses arising from a group of similar transactions, such as gains and losses from financial instruments at fair Pensions value through profit or loss. The company operates a defined contribution pension scheme. Contributions are charged to the profit and loss Investments held as current assets account as they become payable in accordance with the The company classifies investments (cash deposits or rules of the scheme. other debt securities) that cannot be readily realised within 24 hours, but can be realised within 12 months as Investments held as current assets.

Intangible fixed assets Intangible fixed assets are measured at cost less accumulative amortisation and any accumulative impairment losses.

Amortisation is provided on all intangible assets to allocate the depreciable amount of the assets to their residual values over their estimated useful lives, as follows:

Software development Over 3 years

Tangible fixed assets Tangible fixed assets are measured at cost less accumulative depreciation and any accumulative impairment losses.

Depreciation is provided on all tangible fixed assets, other than freehold land, at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life, as follows:

Leasehold land and buildings Over the lease term Fixtures, fittings and equipment Over 3 years

Big Society Capital Limited Report and Financial Statements 2020 47 Financial Reports

2. Total revenue

2020 2019 £ 000 £ 000

Total revenue 11,849 5,671 Represented by: Income Social Impact investment portfolio 4,511 4,784 Treasury portfolio 2,997 3,357 Total income 7,508 8,141 Investment gains/(losses) Social impact investment portfolio 2,659 (4,822) Treasury portfolio 1,682 2,352 Total investment gains/(losses) 4,341 (2,470)

2a. Total Revenue - Social Impact Investment Portfolio

2020 2019 £ 000 £ 000

Total revenue 7,170 (38) Represented by: Income Interest income on financial assets designated as fair value 3,917 3,784 Interest income on financial assets carried at amortised cost 427 750 Dividend income from financial assets designated as fair value 85 139 Fees received 82 111 4,511 4,784 Investment gains/(losses) Net gains/(losses) from financial assets designated as fair value Realised 6,175 4,104 Unrealised (3,499) (8,909) Net gains/(losses) from financial assets carried at amortised cost Realised - (279) Unrealised (74) 315 Net foreign exchange gains/(losses) from financial assets designated as fair value Unrealised 57 (53) 2,659 (4,822) Further analysis of Investment gains/(losses) Net gains/(losses) from financial assets designated as fair value Management fees and expenses paid to fund manager (6,494) (4,000) Valuation changes and income relating to underlying investments 9,170 (805) Net foreign exchange losses from financial assets 57 (53) Net gains/(losses) from financial assets carried at amortised cost Valuation changes and income relating to underlying investments (74) 36 2,659 (4,822)

48 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

2b. Total Revenue - Treasury Portfolio

2020 2019 £ 000 £ 000

Total Revenue 4,679 5,709 Represented by: Income Interest income on financial assets designated as amortised cost 2,997 3,357 2,997 3,357 Investment gains/(losses) Net gains/(losses) from financial assets designated as fair value Realised 546 1,677 Unrealised 972 - Net gains/(losses) from financial assets carried at amortised cost Realised 57 263 Net gains/(losses) on currency forward derivatives Realised (1,852) 2,776 Unrealised 633 38 Net foreign exchange gains/(losses) from financial assets carried at amortised cost Realised 762 (258) Unrealised 564 (2,144) 1,682 2,352

Total revenue increased significantly in 2020 primarily investment sector to deliver returns for all social investors. as result of increased income and write ups within the Management fees as a percentage of total average Social Impact Investment Portfolio. As described in the committed social impact investments were 1.15% in 2020 Strategic Report on pages 5 to 26 the income and valuation (2019: 0.78%). movements on the Social Impact Investment Portfolio reflect the continued growth of the portfolio and the During 2020, the company made investments in foreign current stage of the company’s social impact investments, currency denominated assets. As outlined in Note 14 as these move to a more mature, fully invested position, as – Financial risk management and financial instruments, well as the expected volatility due to the long-term nature the foreign exchange risk is managed with currency of the investments and the use of fair value accounting forward derivative contracts. Any gains/losses on the to value them. As described in Note 15 – Valuation of revaluation of foreign currency denominated assets offset financial instruments, one of the valuation techniques the corresponding gains/losses on the currency forward applied is to value the investments on the basis of their Net derivatives to the extent that the derivatives match the Asset Valuation. This results in the recognition of set-up underlying currency exposure. During 2020 the exchange costs, management fees and other expenses paid to fund gain on foreign currency denominated debt securities was managers, as they are incurred by the investee. £1.3 million (2019: loss of £2.4 million), which was offset by a loss on the currency forward derivatives in 2020 of £1.2 The management fees paid to fund managers allow million (2019: gain of £2.8 million), resulting in a net foreign them to employ high-quality teams to deliver the social exchange gain of £107,000 (2019: £412,000). and financial returns required. In this way, the fees represent the cost of delivering the company’s investment objectives and of building the capacity of the social impact

Big Society Capital Limited Report and Financial Statements 2020 49 Financial Reports

3. Other income

2020 2019 £ 000 £ 000

Government grants received 1 66 Other income 114 78 115 144 During 2020, a grant was received from DCMS relating to SITR III, against which £1,000 was spent during the year.

4. Administrative and other expenses

2020 2019 £ 000 £ 000

Wages and salaries 4,117 3,630 Non-executive directors’ fees 94 78 Social security costs 498 427 Pension costs 374 324 Staff-related costs, including recruitment, training and travel 536 686 Premises 692 698 General and administrative expenses 468 451 Consultancy 169 157 Marketing, including events, sponsorship and website 213 322 Amounts receivable by the company’s auditor (see below) 116 114 Other professional costs 279 205 Depreciation of owned fixed assets 71 107 Amortisation of intangible assets 20 20 Investment related expenses, including legal fees 255 190 Total administrative expenses 7,902 7,409 Treasury management fees 437 538 Total other expenses 437 538

Total administrative and other expenses 8,339 7,947 Amounts receivable by the company’s auditor and its associates in respect of: Auditors’ remuneration for audit services 95 90 Other assurance services 12 10 Taxation compliance services 9 14 116 114

Average number of employees during the year 2020 2019 Number Number

Investment 31 28 Senior management 3 3 Communications 4 4 Operations 17 13 Social and finance sector engagement 8 8 On Purpose and 2027 interns 3 3 66 59 A breakdown of the total number of employees, including directors, with annual remuneration of £60,000 or more and employed as at the period end, is disclosed in the Remuneration Report on page 30.

50 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

5. Directors’ and key management personnel emoluments

2020 2019 £ 000 £ 000

Directors’ emoluments Emoluments 166 233 Company contributions to money purchase pension schemes 7 16 173 249 Highest paid director* Emoluments 72 155 Company contributions to money purchase pension schemes 7 16 79 171 Number of directors to whom retirement benefits accrued Money purchase schemes 1 1 Key management personnel emoluments** Emoluments 745 717 Company contributions to money purchase pension schemes 77 73 822 790 * As described on page 28, the former CEO was an executive director of the company and was in post until May 2020; the current Interim CEO is not a director of the company. **Key management personnel includes one executive director as detailed above.

6. Taxation

2020 2019 £ 000 £ 000

Analysis of charge in period Current tax: Adjustments in respect of previous periods (58) (5) (58) (5) Deferred tax: Origination and reversal of timing differences (4) (1) (4) (1)

Tax credit on profit/(loss) on ordinary activities (62) (6)

Factors affecting tax charge for period The differences between the tax assessed for the period and the standard rate of corporation tax are explained as follows: 2020 2019 £ 000 £ 000

Profit/(Loss) on ordinary activities before tax 3,625 (2,132) Standard rate of corporation tax in the UK 19.0% 19.0% Profit/(loss) on ordinary activities multiplied by the standard rate of corporation tax 689 (405) Effects of: Income not taxable and/or expenses not allowable for tax purposes (366) 681 Capital allowances for period in excess of depreciation 2 (2) Utilisation of tax losses (325) (274) Adjustments to tax charge in respect of previous periods (58) (5) Deferred tax – origination and reversal of timing differences (4) (1) Current tax credit for period (62) (6)

Big Society Capital Limited Report and Financial Statements 2020 51 Financial Reports

7. Intangible fixed assets

Software development £ 000

Cost At 1 January 2020 61 Additions 12 At 31 December 2020 73 Amortisation At 1 January 2020 36 Provided during the year 20 At 31 December 2020 56 Carrying amount At 31 December 2020 17 At 31 December 2019 25

8. Tangible fixed assets

Fixtures, fittings, tools Land and and buildings equipment Total £ 000 £ 000 £ 000

Cost At 1 January 2020 330 372 702 Additions - 55 55 At 31 December 2020 330 427 757 Depreciation At 1 January 2020 315 276 591 Charge for the year 15 56 71 At 31 December 2020 330 332 662 Carrying amount At 31 December 2020 - 95 95 At 31 December 2019 15 96 111

9. Fixed asset investments

Total Social impact investment portfolio £ 000

At 1 January 2020 270,443 Additions 100,805 Repayment of loans (34,323) Redemptions (28,700) Profit and loss* 3,420 At 31 December 2020 311,645

*Profit and loss is predominantly a combination of management fees and expenses paid to fund managers and fair value adjustments on social impact investments.

52 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

The company holds 20% or more of the share capital of the following undertakings:

Investment Country of Class of BSC% as at Aggregate Aggregate name incorporation/ shares 31 December capital and profit/(loss) principal place held 2020 reserves of for the year of business¹ the entity² of the entity² £000 £000

3SC Capitalise Limited UK Ordinary 50.00 2 0 Ada Ventures Soc I LP Humphreys Law Ltd Partnership 99.99 N/A³ N/A³ 5 Merchant Square interest London W2 1AY Bethnal Green Ventures LLP UK Partnership 35.35 3,890 (504) interest Big Issue Invest Outcomes 113-115 Fonthill Road Partnership 85.00 2,924 (870) Investment Fund LP Finsbury Park interest London N4 3HH Big Issue Invest Social 113-115 Fonthill Road Partnership 62.98 9,370 (3,083) Enterprise Investment Finsbury Park interest Fund II LP London N4 3HH BMO WUK Residential Luxembourg Registered 20.00 Holding less than 50%, Real Estate FCP-RAIF shares no public filing required Bridges Evergreen Capital 38 Seymour Street Partnership 39.44 Holding less than 50%, Limited Partnership London W1H 7BP interest no public filing required Bridges Social Impact 38 Seymour Street, Partnership 44.44 Holding less than 50%, Bond Fund LP London W1H 7BP interest no public filing required Bridges Social Interim LP 38 Seymour Street, Partnership 99.98 9 0 London W1H 7BP interest Cheyne Social Property 94 Solaris Avenue Partnership 100.00 915 20 High Impact (I) LP Camana Bay interest PO Box 1348 Grand Cayman Ky1-1108 Cayman Islands Children’s Support UK Ordinary 26.60 1,266 0 Services Limited City Funds LP Narrow Quay House Partnership 50.00 1,329 (243) Narrow Quay interest Bristol BS1 4QA Community Owned UK Partnership 50.00 18,147 1,036 Renewable Energy LLP interest Eka Ventures 1 LP Flat 1, Knaresborough Partnership 99.60 N/A³ N/A³ House, 5-7 interest Knaresborough Place London SW5 0TN Fair by Design Venture The Council House Partnership 44.68 Holding less than 50%, Limited Partnership Victoria Square interest no public filing required Birmingham West Midlands B1 1BB Funding Affordable Luxembourg Registered 19.26 Holding less than 50%, Homes SICAV SIF SA shares no public filing required Impact Ventures Luxembourg Registered 41.58 Holding less than 50% SA, SICAV-SIF shares no public filing required National Homelessness The Great Barn, Partnership 32.52 Holding less than 50%, Property Fund 5 Scarne Court, interest no public filing required Limited Partnership Hurdon Road, Launceston, Cornwall PL15 9LR

Big Society Capital Limited Report and Financial Statements 2020 53 Financial Reports

9. Fixed asset investments (continued)

Investment Country of Class of BSC% as at Aggregate Aggregate name incorporation/ shares 31 December capital and profit/(loss) principal place held 2020 reserves of for the year of business¹ the entity² of the entity² £000 £000

Nesta Impact Investments 58 Partnership 45.46 Holding less than 50%, 1 Limited Partnership Victoria Embankment interest no public filing required London EC4Y 0DS North East Social Investment 5th Floor Partnership 48.75 Holding less than 50%, Fund Limited Partnership 27-35 Grainger Street interest no public filing required Newcastle upon Tyne Tyne and Wear NE1 5JE Public Services Lab LLP UK Partnership 23.53 (1,040) (173) interest Resonance Supported The Great Barn Partnership 48.80 Holding less than 50%, Homes Fund 5 Scarne Court interest no public filing required Limited Partnership Hurdon Road Launceston Cornwall PL15 9LR Schroder BSC UK Ordinary 29.90 N/A³ N/A³ Social Impact Trust Shared Lives 131-151 Partnership 37.93 Holding less than 50%, Investments LP Great Titchfield Street, interest no public filing required London W1W 5BB Social Finance Care and UK Partnership 50.00 3,071 (620) Wellbeing Investments LLP interest Social Growth Fund LLP UK Partnership 50.00 7,072 344 interest The Charity Bank Limited UK Ordinary 63.09 26,729 (479) The Community 4th Floor Partnership 55.56 12,997 (54) Investment Fund L.P. Reading Bridge House interest George Street Reading RG1 8LS The Good Food Ventures LP 4th Floor 20 Air Street Partnership 60.00 N/A³ N/A³ London W1B 5DL interest The Third Sector UK Partnership 50.00 8,531 53 Investment Fund LLP interest Triodos New Horizons Limited UK Ordinary 30.00 2 0 Zamo Capital 1 12 Constance Road Partnership 99.99 1,180 (627) Limited Partnership London E16 2DQ interest

The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 requires that: ¹ for unincorporated undertakings, the address of its principal place of business is stated. ² for all undertakings where the company’s holding is 50% or greater, and for undertakings where the company’s holding is 20% or greater and the undertaking is required by any provision of the 2006 Companies Act to deliver a copy of its balance sheet, the aggregate amount of the capital and reserves of the undertaking as at the end of its relevant financial year, and its profit or loss for that year is also stated. ³ Aggregate capital and reserves and profit or loss not available, as first financial year end falls after 31 December 2020.

54 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports 10. Debtors

2020 2019 £ 000 £ 000

Other debtors 63 55 Prepayments 441 436 Accrued income on Treasury Portfolio 120 - Accrued income on grants - 3 Accrued income on derivative financial instruments 823 190 Corporation tax 30 - 1,477 684

11. Investments held as current assets

2020 2019 £ 000 £ 000

Treasury Portfolio – cash deposits 24,596 12,574 Treasury Portfolio – listed debt securities 169,698 225,158 Treasury Portfolio – social bonds/equity/multi-asset funds 32,342 31,434 226,636 269,166 Investments held as current assets can be realised within one year, but not within 24 hours. Social bond/equity/multi- asset funds are open-ended investment companies, and are held as part of the social impact investment allocation within the Treasury Portfolio, as described in the Strategic Report from page 5 above.

Listed debt securities include items with a fair value of £nil (2019: £760,000), which have been pledged as collateral for a contingent liability on foreign exchange forward contracts. The collateral is adjusted daily to reflect any contingent liability arising as at the prior day close of business and is subject to a minimum transfer threshold of £250,000. The collateral can be replaced by a range of agreed alternative financial assets. The company retains the risks and rewards of ownership.

12. Creditors: amounts falling due within one year

2020 2019 £ 000 £ 000

Trade creditors 381 222 Other taxes and social security costs 142 129 Other creditors 47 37 Accruals 651 501 Deferred income 4 - 1,225 889

Big Society Capital Limited Report and Financial Statements 2020 55 Financial Reports

13. Deferred taxation

2020 2019 £ 000 £ 000

Accelerated capital allowances 19 23 Adjustment in respect of prior period 529 (561) Tax losses carried forward (1,181) (977) Tax losses not recognised as a deferred tax asset 652 1,538 Provision for deferred tax 19 23

Provision for liabilities 2020 2019 £ 000 £ 000

At 1 January 2020 23 24 Credited to the profit and loss account (4) (1) At 31 December 2020 19 23

14. Financial risk management and financial instruments

Introduction The Board is responsible for overall corporate The Social Impact Investment Portfolio comprises unlisted governance, which includes ensuring that there are equity investments, loans, investments in unlisted funds adequate systems of risk management. The systems and investments in social impact bonds. All social impact and processes aim to identify, measure and report investments are approved by the Investment Committee risks. Risk is controlled through a system of procedures, (which has been delegated authority by the Board to checks, reports and responsibilities. The Audit, Risk operate within set parameters). and Compliance Committee examines management processes and other arrangements to ensure the The Treasury Portfolio comprises bank and building appropriateness and effectiveness of systems and society cash deposits, certificates of deposit and controls, including risk management. listed and unlisted debt securities, social bond/equity/ multi-asset funds, and represents capital held before As described in the Strategic Report starting on page 5 it is drawn down into social impact investment. The above, the company’s investment portfolio comprises a Treasury Portfolio operates using a socially responsible Social Impact Investment Portfolio and a Treasury Portfolio. investment process.

56 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

14. Financial risk management and financial instruments (continued)

Categories of financial instrument Financial instruments as at 31 December by category are shown below: 2020 Financial Financial instruments instruments measured at fair measured at value through amortised Non-financial profit or loss cost instruments Total £ 000 £ 000 £ 000 £ 000

Assets Tangible and intangible fixed assets - - 112 112 Fixed asset investments 294,169 17,476 - 311,645 Debtors 823 - 654 1,477 Investments held as current assets 56,938 169,698 - 226,636 Cash at bank and in hand - 65,852 - 65,852 Liabilities Creditors: amounts falling due within one year - (1,225) - (1,225) Deferred taxation - - (19) (19) 351,930 251,801 747 604,478

2019 Financial Financial instruments instruments measured at fair measured at value through amortised Non-financial profit or loss cost instruments Total £ 000 £ 000 £ 000 £ 000

Assets Tangible and intangible fixed assets - - 136 136 Fixed asset investments 254,103 16,340 - 270,443 Debtors 190 58 436 684 Investments held as current assets 48,845 220,321 - 269,166 Cash at bank and in hand - 16,274 - 16,274 Liabilities Creditors: amounts falling due within one year - (889) - (889) Deferred taxation - - (23) (23) 303,138 252,104 549 555,791

The financial instruments not accounted for at fair value through profit or loss are assets and liabilities whose carrying amounts at the period end approximate fair value.

Big Society Capital Limited Report and Financial Statements 2020 57 Financial Reports

14. Financial risk management and financial instruments (continued)

(Categories of financial instrument continued) Gains and losses recognised in the profit and loss account during the period to 31 December by category are shown below: 2020 Financial Financial assets Financial assets measured at fair derivatives measured at value through measured at amortised Other income profit or loss fair value cost and expense Total £ 000 £ 000 £ 000 £ 000 £ 000

Interest income 3,917 - 3,424 - 7,341 Fee and dividend income 167 - - - 167 Investment gains/(losses) 4,251 (1,219) 1,309 - 4,341 Other income - - - 115 115 Administrative and other expenses - - (437) (7,902) (8,339) Tax on loss on ordinary expenses - - - 62 62 8,335 (1,219) 4,296 (7,725) 3,687

2019 Financial Financial assets Financial assets measured at fair derivatives measured at value through measured at amortised Other income profit or loss fair value cost and expense Total £ 000 £ 000 £ 000 £ 000 £ 000

Interest income 3,784 - 4,107 - 7,891 Fee and dividend income 223 - 27 - 250 Investment gains/(losses) (2,951) 2,814 (2,333) - (2,470) Other income - - - 144 144 Administrative and other expenses - - (538) (7,409) (7,947) Tax on loss on ordinary expenses - - - 6 6 1,056 2,814 1,263 (7,259) (2,126)

Credit risk Credit risk is the risk of financial loss from a counterparty’s Statement of Financial Position date is represented by the failure to settle financial obligations as they fall due. The respective carrying amounts of the relevant financial assets company is exposed to credit risk principally from debt in the Statement of Financial Position, with the exception securities held, loans and receivables and cash deposits. of listed debt securities designated as at amortised cost, for which the credit exposure and the carrying value are Investments in unlisted funds and loans included in fixed shown below. The carrying value includes amortisation of asset investments are all social impact investments. Debt the premium at purchase and does not include any market securities, showing as current asset investments, are held revaluation, and therefore does not represent the current within the Treasury Portfolio. Cash deposits are held either credit risk. for operational purposes or as part of the Treasury Portfolio. Cash deposits that can be withdrawn at any time without The company uses foreign exchange forward contracts to notice and without penalty or that have a maturity or period manage its exchange risk exposure from holdings of non- of notice of not more than 24 hours or one working day GBP denominated financial assets. Collateral is exchanged are shown as cash at bank and in hand, whereas all other on open foreign exchange forward contracts representing deposits with a maturity of up to one year are shown as the unrealised gain (receipt of collateral by the company) or investments held as current assets. loss (pledge of collateral by the company) on a daily basis. Within the Treasury Portfolio, the company has set a Credit risk arises from changes in the value of the open maximum exposure limit for each counterparty. The treasury foreign exchange forward contracts being insufficiently policy seeks to minimise the exposure to counterparties covered by collateral received (to cover unrealised gains) with perceived higher risk of default by specifying an average if the counterparty to the contract does not complete credit rating for the portfolio. The Treasury Portfolio is the exchange of currency on the contracted settlement managed externally and counterparty exposure limits date. This is mitigated by utilising standard credit support and average credit rating are monitored by the external agreements with a limited number of mainstream financial managers. The company receives monthly treasury reports. institutions and reliance upon the collateral management processes at the investment manager. The company’s maximum credit risk exposure at the

58 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

14. Financial risk management and financial instruments (continued)

(Credit risk continued) Credit risk exposure as at the Statement of Financial Position date comprises:

Credit risk exposure 2020 2019 £ 000 £ 000

Fixed asset investments 311,645 270,443 Other debtors 886 245 Accrued income 120 3 Social bond/equity/multi-asset funds – Investments held as current assets 32,342 31,434 Cash deposits – Investments held as current assets 24,596 12,574 Listed debt securities* 174,349 225,158 Cash deposits – Cash at bank and in hand 65,852 16,274 Maximum exposure to credit risk as at the Statement of Financial Position date 609,790 556,131

Credit risk * Included within listed debt securities: exposure Carrying value £ 000 £ 000

Listed debt securities designated as at amortised cost 174,349 169,698 174,349 169,698

As at the year end Cash at bank and in hand and Investments held as current assets were held at institutions rated as follows by Standard & Poor’s Investor Services: Rating 2020 2019 £ 000 £ 000

Social bond/equity/multi-asset funds investments Not rated 32,342 31,434 Listed debt securities AAA 32,243 47,444 Listed debt securities AA 28,545 51,137 Listed debt securities A 68,448 90,865 Listed debt securities BBB 30,552 30,373 Listed debt securities Not rated 9,910 5,339 Cash deposits – Investments held as current assets AA - 998 Cash deposits – Investments held as current assets A-1 - 11,576 Cash deposits – Investments held as current assets Not rated 24,596 - Cash deposits – Cash at bank and in hand A-1 65,852 16,274 292,488 285,440

Liquidity risk Liquidity risk is the risk that cash may not be available The company’s investments in listed debt securities are to pay obligations. The company’s policy is to ensure considered to be readily realisable as they are actively it has sufficient funds to fulfil liabilities as they fall traded. All cash deposits held as current assets have a due, including investment commitments approved maturity of less than 12 months. by the Investment Committee (see Note 20 – Capital The company’s overall liquidity is monitored on a commitments, for details of investment commitments). daily basis. The company expects to receive quarterly The company’s financial assets include loans, unlisted equity capital inflows to meet its social impact investment investments, investments in unlisted funds and investments commitments and other obligations. in social impact bonds, which are generally illiquid.

Big Society Capital Limited Report and Financial Statements 2020 59 Financial Reports

14. Financial risk management and financial instruments (continued)

(Liquidity risk continued) An analysis of contractual creditor balances, by maturity, is shown below: 2020 Carrying Contractual 6 months amount cash flows or less £ 000 £ 000 £ 000

Creditors: amounts falling due within one year 1,225 1,225 1,225 1,225 1,225 1,225

2019 Carrying Contractual 6 months amount cash flows or less £ 000 £ 000 £ 000

Creditors: amounts falling due within one year 889 889 889 889 889 889

Market risk Market risk is the risk that changes in market prices, denominated bond is purchased a spot trade and a such as interest rates and credit spreads (not relating forward are executed, and these are rolled forward every to changes in the issuer’s credit standing) will affect the three months. The spot trade buys foreign currency and company’s income or the fair value of its holdings of sells GBP (originally to fund the bond purchase) and a financial instruments. new forward contract is then executed to sell foreign currency and buy GBP, creating a foreign currency The company has interest rate exposure. The company liability that offsets the investment. Currently the size currently has £292.5 million in cash or current asset of the company’s investment in the foreign currency investments that earn interest at a variety of rates. denominated fund is too low for a similar process to be Any reduction in interest rates will reduce the interest cost-effective due to the associated fees; the fund also income on these deposits. A reduction of interest holds GBP denominated assets which partially mitigate rates by 1% would result in a reduction in returns of the exposure. The exposure continues to be monitored £2.9 million. and the company has the ability to implement a similar Foreign exchange risk procedure to the bonds when/if required. The company is exposed to foreign currency risks on Regulatory risk assets and liabilities as a result of changes in exchange The company is authorised and regulated by the FCA. rates. The company invests in foreign currency It is required to regularly assess the amount of capital denominated bonds through its Treasury Portfolio and a needed for operations and will hold liquid capital in foreign currency denominated fund in the Social Impact excess of this amount. Investment Portfolio, and so has foreign currency risk exposure on those assets. The company mitigates the The company has, at all times during the period under risk on the bonds by putting in place matching currency regulatory supervision, held sufficient capital to meet its forward derivative contracts. When a foreign currency regulatory capital requirement.

60 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

15. Valuation of financial instruments

The determination of fair value for basic financial Investment is no longer relevant, the company may instruments for which there is no observable market apply the Price of Recent Investment, for a limited price requires the use of valuation techniques as period following the date of the relevant transaction. described in Note 1 – Significant accounting policies, Where it is felt that there has been a change to the Basic financial instruments – iii.) Fair value measurement. milestones or benchmark then the company will use the Price of Recent Investment adjusted to reflect The company uses a three-level hierarchy for fair value milestone/benchmark analysis. measurement disclosure, as follows: • Where appropriate and reasonable earnings or Level One revenue multiples are available for comparable The unadjusted quoted price in an active market for businesses, the company will apply the Multiples identical assets or liabilities that the entity can access at valuation technique to derive a value for the the measurement date. investment. • If industry benchmarks can be applied to the Level Two investment to derive a fair value, these will be applied. Inputs other than quoted prices included within Level 1 • If future cash flows can be reasonably estimated, and it that are observable (i.e. developed using market data) for is felt that the risks, due to the high level of subjectivity, the asset or liability, either directly or indirectly. involved in applying the Discounted Cash Flow method Level Three do not render the method insufficiently reliable, this Inputs are unobservable (i.e for which market data is will be applied. unavailable) for the asset or liability. • Where a regular Net Asset Valuation is available for the investment, the company will assess this for In determining a fair value using Level 3 valuation reasonableness and consider whether the investment techniques, the company applies the principles included can be valued on the basis of the underlying fair in the International Private Equity and Venture Capital value of its assets, rather than its earnings. If this is Valuation Guidelines (2018 Edition): considered appropriate the company will apply the • Where an investment has been made recently, or Adjusted Net Asset Valuation method. where there has been subsequent, significant new The company may decide to use a combination of investment into the company, a more accurate the mentioned methods, or other methods that are valuation is not available and there is no evidence considered more appropriate to derive the fair value of to suggest that the unadjusted Price of Recent its investments.

The fair value hierarchy of financial assets and liabilities held at fair value as at 31 December can be analysed as follows:

2020 2019 £ 000 £ 000

Level 1 Investments held as current assets 17,897 16,888 Level 2 Investments held as current assets 39,041 31,597 Derivative financial instruments 823 190 Level 3 Fixed asset investments 294,169 254,103 351,930 303,138 There have been no changes in classification of assets held at each level.

Financial assets held at fair value through profit or loss £ 000

Balance at 1 January 2020 254,103 Purchases 98,156 Sales (61,538) Total investment returns 3,268 Balance at 31 December 2020 294,169 All Level 3 financial assets held at fair value are investments held within the Social Impact Investment Portfolio.

Big Society Capital Limited Report and Financial Statements 2020 61 Financial Reports

16. Share capital

Nominal 2020 2020 2019 value Number £ 000 £ 000

Allotted, called up and fully paid: Ordinary A shares £1 each 426,345 426,345 381,345 Ordinary B shares £1 each 200,000 200,000 200,000 626,345 581,345

17. Profit and loss account

2020 2019 £ 000 £ 000 £ 000

At 1 January 2020 (25,554) (23,428) Profit/(Loss) for the financial year 3,687 (2,126) At 31 December 2020 (21,867) (25,554)

18. Cash and cash equivalents

2020 2019 £ 000 £ 000

Cash at bank 65,852 16,274 Current asset investments (maturity less than 3 months from the date of acquisition) 21,597 11,576 Cash and cash equivalents per cash flow statement 87,449 27,850 As described in Note 11 – Investments held as current assets, investments held as current assets can be realised within one year, but not within 24 hours. For cash flow purposes those investments that have a maturity or period of notice of less than three months from the date of acquisition are included as cash and cash equivalents. A breakdown of investments held as current assets is provided below: 2020 2019 £ 000 £ 000

Current asset investments 21,597 11,576 (maturity less than three months from the date of acquisition) Current asset investments 2,999 998 (maturity greater than three months from the date of acquisition) Listed debt securities 169,698 225,158 Social bond/equity/multi-asset funds investments 32,342 31,434 Investments held as current assets per Statement of Financial Position 226,636 269,166

62 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

19. Events after the reporting date

During March 2021 the company received a £15 million grant. This grant will be directed towards specific housing- related investment programmes designed to support those most in need post-pandemic. Further details of the grant will be released in due course.

20. Capital commitments

The company recognises investments and potential investments at three distinct stages of the investment process: 1. Investments signed and 2. Investments signed, 3. In principle commitments drawn down – legal agreements commitment undrawn – legal – the commitment has been are completed and signed and agreements are completed and approved in principle by funds (in total or partial) have signed and funds (in total or the company’s Investment been drawn down. The amounts partial) have not been drawn Committee, legal agreements and drawn down are recognised as down. These are not recognised deal terms are in the process of financial assets in the Statement within the Statement of Financial being prepared. These are not of Financial Position, and the Position, but are disclosed below. recognised within the Statement balance of the commitment is of Financial Position, but are disclosed below. disclosed below.

As at 31 December, there were capital commitments, in respect of investments signed, commitments undrawn, of:

2020 2019 £ 000 £ 000

Commitments contracted, undrawn fully or partially and not provided in the Financial Statements 193,133 237,240

As at 31 December, there were in principle commitments of: 2020 2019 £ 000 £ 000

In principle commitments (approved by the Investment Committee, subject to legal documentation) 25,850 42,000

21. Other financial commitments

Land and Land and buildings buildings 2020 2019 £ 000 £ 000

Falling due: within one year 372 368 within two to five years 1,196 1,489 in over five years - 80 1,568 1,937

Big Society Capital Limited Report and Financial Statements 2020 63 Financial Reports

22. Related party transactions

During 2020 The Oversight Trust – Assets for the (2019: £78,400) to Big Society Capital, in respect of a Common Good (formerly The Big Society Trust), being licence fee for the use of its offices. As at 31 December the parent company, purchased £45 million (2019: £nil) 2020 there was an outstanding balance of £6,500 of £1 Ordinary A shares in Big Society Capital Limited. (31 December 2019: £6,500). The transactions were During 2020 Big Society Capital Limited incurred £48,000 made on terms equivalent to those that prevail in of costs (2019: £30,000) on behalf of the Oversight Trust. arm’s length transactions. No amount was outstanding at 31 December 2020 (31 December 2019: £30,000). Directors’ and senior management emoluments are disclosed in Note 5 – Directors’ and key management During the period Access – The Foundation for Social personnel emoluments, and the Remuneration Report Investment, being a member of The Oversight Trust – on page 30 above. Assets for the Common Good Group, paid £78,400

23. Controlling party

The directors consider that the immediate parent undertaking The consolidated financial statements of the group are and the ultimate controlling party of this company is available to the public and may be obtained from The Oversight Trust – Assets for the Common Good, a Companies House. company incorporated in the UK and limited by guarantee.

24. Presentation currency

The financial statements are presented in sterling.

25. Legal form of entity and country of incorporation

Big Society Capital Limited is a limited company incorporated in England.

26. Principal place of business

The address of the company’s principal place of business and registered office is: New Fetter Place, 8–10 New Fetter Lane, London EC4A 1AZ

64 Big Society Capital Limited Report and Financial Statements 2020 Financial Reports

Big Society Capital Limited Report and Financial Statements 2020 65 www.bigsocietycapital.com Registered number 07599565